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Arizona AZ Foreclosure Laws

Lenders in the state of Arizona may foreclose on deeds of trusts or mortgages in default using either a non-judicial or judicial foreclosure process.

Judicial Foreclosure

A judicial process of foreclosure requires that the lender file a lawsuit and attain a court order to foreclose on a particular property. After the court orders a foreclosure, the property is auctioned off to the highest bidder.

This type of process is generally used when no power of sale is present in the mortgage or deed of trust. A power of sale is a clause found in a deed of trust or mortgage that authorizes the sale or transfer of land as outlined by the terms of that clause.

Non-Judicial Foreclosure

If a power of sale clause exists in the deed of trust or mortgage document, a non-judicial process of foreclosure is used. This allows the lender to sell the property and pay off the balance of the loan in the event the homeowner defaults. The power to sell may be completed by the lender or their representative in situations where a power of sale exists. The procedure is explained in the "Power of Sale Foreclosure Procedure".

Power of Sale Foreclosure Procedure

If the deed of trust or mortgage has a power of sale clause and it details the time, place and terms of sale, then the outlined procedure must be followed. However, if the power of sale clause, does not clarify the time, place and terms of sale, then a foreclosure sale must be handled in the following manner:

The trustee must record a notice of sale in the office of the recorder of the county where the property is located. Within five (5) days after the notice is recorded, the trustee must mail, by certified mail, a copy of the notice of sale to each of the people who are parties to the trust deed, except for themselves. The notice must also appear in a newspaper in the county where the property is located once a week for four (4) successive weeks, with the last notice being published not less than ten (10) days prior to the date of the sale.

The trustee retains the option of also posting the notice at least twenty (20) days prior to the date of sale, in a noticeable place, on the property to be sold. They may post the notice at the courthouse or at a specified place of business for the trustee in the county in which the property is located, provided it can be done without breaching the peace.

The sale must be conducted by either the trustee or the trustee’s agent. Except as it relates to the lender, the sale is to be conducted for cash to the highest bidder. The lender has the option of making a "credit bid". A credit bid is a bid generally less than or equal to the balance on the defaulted loan.

The winning bidder must pay the bid price by 5:00 p.m. on the day after the auction, (excludes weekends or legal holiday). The trustee also has the right to extend the time a buyer has to deliver the payment, upon written agreement. Each bid is considered an irrevocable offer until the highest bidder pays the bid price to the trustee’s satisfaction. If the highest bidder fails to make the payment by the allotted time, then the trustee may postpone the sale.

The proceeds, upon completion of the sale will go to the payment of the obligations secured by the deed of trust that was foreclosed, then to junior lien holders in order of priority. The successful bidder receives a trustee’s deed, which provides conclusive evidence that the trustee conducted the foreclosure sale on the property.

The sale may be postponed to another time or placed by the trustee after public notice is given as to the new date, time and/or place at the last place and time the property was offered for sale. No other notice is required.

Deficiency suits by the lender are not allowed if (1) the property involved in foreclosure is 2.5 acres or less and (2) the property was a single one-family or a single two-family dwelling, even if the high bid at foreclosure was less that the balance due on the loan. In foreclosure situations involving other types of property, deficiency suits are allowed, but limited to the difference between the balance owed and the fair market value of the property, and then only if the suit is brought within ninety (90) days of the power of sale foreclosure.

Legal Information Is Not The Same as Legal Advice This site provides information about Arizona state foreclosure law designed to help users safely cope with their own legal needs and possible find alternatives. Everyone's legal status is different. The laws of every state are in constant change and we recommend you consult a lawyer.