Foreclosure Process in Arizona
Foreclosure is probably a taboo word for most home owners living on mortgage terms and it is not hard to understand why. Imagine someone auctioning off your home, a home you have known for several years gone with the wind. Sounds pretty bad, but that’s the harsh reality of life. A couple months or even days of missed payments and it’s gone!
However, did you know that you can still get back your home even after missing payments and a foreclosure has been issued here in Arizona? Do you also know the procedure to be followed as well as the laws governing foreclosure for it be deemed valid in the State of Arizona? Don’t worry, we are here to help.
First and foremost, what do you understand by the term foreclosure?
Foreclosure is basically the process by which a trustee / lender takes possession of a mortgaged property due to the mortgager’s failure to keep up with the mortgage payments. For the process to be seamless and be free from abuse, several steps have to be followed in accordance to state laws due to the fact that different states have different laws that govern them.
In Arizona for example, since it is a title theory state (your property remains in trust until loan is repaid), the legal title of the property will be held by the lender and the homeowner will be issued with what is known as an equitable title (right to possession and use property in absence of the rightful owner).
In title theory states, the foreclosure process is usually governed Power of Sale clause which is normally fitted to mortgage agreement documents. This clause gives the lender the power to sell of your property the moment you default payment without necessarily having to use the courts (Non-judicial foreclosure). However, lien theory states require a court process for the foreclosure to happen.
Non-Judicial Foreclosure Process in Arizona
1. State of Default by the Homeowner
In technical terms, once the homeowner has defaulted payment on his or her mortgage, the lender can begin the foreclosure process immediately. However, most lenders would rather begin the process after several months of default. Reason? Well, although it might seem unrealistic but lenders too know that at some point in life one may go through a rough patch at it will be inhuman of them to kick you out without giving you a chance to sort out your mess (A great marketing strategy). Another reason why they would rather wait for the defaulted payments rather than sell your house is because, well they love your money and not your house!
2. Filing of Notice of Trustee Sale
Once the lender has established that the homeowner has defaulted payments for a long period of time and there are no signs it being re-payed, then will he initiate the foreclosure process by filling what is known as a Notice of Trustee Sale (NOS). In this case, the Trustee is the lender i.e bank or other lending institution. However, most lenders usually issue a final warning to the defaulter through a Notice of Default / Demand (NOD) (although it is not a requirement by Arizona State Laws) prior to issuance of a Notice of Trustee Sale.
For the Notice of Trustee Sale (NOS) to hold, certain guidelines have to be adhered to. First and foremost, it must be recorded at the county recorder’s office. Once this is done, it must be advertised in the local newspaper or Daily’s a minimum of once a week for four successive weeks. For the property to be sold, the sale date should be not more than ten days after the last advertisement on the local newspaper. The NOS should also be posted in a conspicuous place such as on the property, auction courthouse or even at the lender’s (trustee’s) point of business.
Lastly, within the period of five days after recording the NOS, the trustee must mail a copy to the property address which should be through a certified mail to the tenants that the house is going into foreclosure. It will specify the property’s auction date and where the auction will take place which by law should happen not less than 90 days after issuance of a NOS.
Although there are redemption periods (periods in which a home owner can catch up with their loans and win back their homes which can happen even after their home is sold.) are prevalent in some states, it is not the case here in Arizona when non-judicial foreclosure is involved. Here, the process can only be halted before the property is sold but once the hammer strikes, the property ceases to be yours.
3. Property Sale (Trustee Sale)
Property under foreclosure is usually sold through an auction to the highest bidder provided it meets the minimum sale bid on the date and place stipulated on the Notice of Trustee Sale. However, if the bids either fall short of the minimum bid or there are no bids on the property, the property is then held under the ownership of the Trustee until a later date when it will be sold. The sale should either be carried out by the Trustee or the Trustee’s agent.
If a bid is successful, (meets the minimum bid threshold) then the highest bidder is required to pay a non refundable fee of $10,000 which should be through a cashier’s check and the balance should be cleared by the next business day (by 5:00 pm).
Should the bidder fail to pay the balance by 5:00pm the following business day, the trustee may choose to postpone the sale after being notified of the option to buy.
‘Zombie’ Foreclosures Down 23 Percent in U.S.
According to RealtyTrac’s Q3 2014 Zombie Foreclosure Report, found that 117,298 homes actively in the foreclosure process had been vacated by the homeowners prior to a completed foreclosure, representing 18 percent of all active foreclosures. These vacant properties will likely end up as short sales, foreclosure auction sales or bank-owned sales in the future.
There were 117,298 owner-vacated foreclosures nationwide in third quarter of 2014,…(read more)
4. Issuance of Trustee Deed
Once the successful bidder had paid all the dues in full, he or she will then be issued with what is known as a Trustee Deed which should be within 7 days of receipt of payment. This document provides enough evidence that the trustee undertook the foreclosure properly.
Important things to note during the 90 day foreclosure period is that the homeowner is responsible for any damage that occurs to the property during this period. If you decide to trash your house, break windows or even kitchen cabinets, the blame would be only on you and you will be liable for prosecution.
Judicial Foreclosure Process in Arizona
Although this process is not popular in Arizona, circumstances may force the lender to use this avenue. The circumstance in this case is when there is no Power of sale agreement in a mortgage or deed of trust. In this case, a lawsuit to obtain a court order to foreclosure will have to be filled. Of the suit is successful, your home will be auctioned off to the highest bidder.
Read more at http://www.azsoldhouse.com/
This video about Judicial Foreclosure Process in AZ and other states