What Homeowner’s Need to Know About Anti-Deficiency Laws in Arizona

When homeowners fall behind on mortgage payments, many homeowners assume that losing their home is the worst-case scenario. However, if the lender is not able to recover the full amount owed on the home, they will typically attempt to get a “deficiency judgment” against the borrower for the difference between the sale amount and the total amount owed on the mortgage.

Luckily for borrowers facing a possible foreclosure, there are anti-deficiency laws in Arizona that protect against deficiency judgments.  We put together a short guide with the most important concepts relating to anti-deficiency laws in Arizona.

What Are Arizona Anti-Deficiency Laws?

Arizona Revised Statute §33-729 protects homeowners with a purchase money mortgage from deficiency judgments.  To qualify, the property must be less than two and half acres and used as single one-family or single two-family dwelling.

However, Section B of the statute provides an exception where a borrower can be held responsible for the diminished value of the home if they are shown to have committed “voluntary waste.” Voluntary waste is waste caused by willful destruction or carrying away of something attached to the property. While it is certainly understandable for people to lose interest in taking care of a home they will soon be losing, committing voluntarily waste is one of the few ways a homeowner owner can place themselves at risk of facing a deficiency judgment.

Anti-Deficiency Laws for a Deed of Trust in Arizona

In Arizona, a Deed of Trust is frequently used by lenders to obtain a lien on Arizona real property and secure the obligations contained in the Promissory Note. A Deed of Trust is faster than a mortgage in the event of a default.  With a Deed of Trust, lenders can utilize the process of a trustee’s sale instead of going through the lengthy judicial process of a foreclosure.

Arizona Revised Statute §33-814 provides the legal framework for deficiency judgments after a trustee’s sale in Arizona.  The most important thing for a borrower to understand is that they can add language to the Deed that prohibits the recovery of the additional balance after a trustee’s sale.  This would have to be considered before you sign a loan agreement.  However, most homeowners are protected from a deficiency judgment by Section G of the statute.  This section provides clear anti-deficiency protections for the borrower if the property is less than two and half acres and used as a single one or two-family dwelling.

Using a Deed in Lieu of Foreclosure

If you believe your situation might be outside the protections provided by the Arizona anti-deficiency statutes, you can avoid foreclosure and protect against a deficiency judgment by assigning the deed directly to the Lender. Please note that Lender would need to voluntarily accept this assignment.  This process saves all parties a significant amount of time and avoids the expense of a lengthy legal process.  While it can be straight forward in some cases, you will want to have an experienced real estate attorney represent your interests while negotiating a possible deed in lieu of foreclosure agreement.

Find an Anti-Deficiency Attorney in Arizona

Facing a possible foreclosure is a stressful experience and you do not want to attempt to negotiate or handle the experienced real estate attorneys working for a lender on your own.  The attorneys at MacQueen & Gottlieb have significant experience with the foreclosure process, trustee’s sales, and anti-deficiency laws in Arizona.  Our team can review your case, detail your available options, represent your and legal interests in any negotiations with a lender.  Contact us today at 602-533-2840 to schedule an initial consultation or make an appointment online.