by Arizona Real Estate Attorney Jeana Morrissey
I consult with property owners several times each week concerning their risks, protections and obligations under Arizona’s foreclosure laws, as well as the legal, tax and practical implications of alternatives to foreclosure, such as short sales, deeds in lieu of foreclosure or loan modifications. Over the past year, I’m pleased to note that more homeowners and real estate professionals are beginning to understand, or are at least aware of, the potential risks related to short sale transactions. Even so, there is still a significant amount of misinformation related to short sales on the internet, leading to confusion, and many people still don’t understand that short sales can be fraught with uncertainties. In addition, homeowners may not be aware of the options available to them during the short sale process.
A common assumption of many home owners and real estate agents has been that Arizona’s anti-deficiency statutes always apply to protect borrowers in a short sale as well as a foreclosure. This is incorrect. The anti-deficiency protections clearly apply where a purchase money lender forecloses on a “qualifying” Arizona property. In a foreclosure situation, Arizona statutes and case law define the circumstances in which a lender is prohibited from pursuing a deficiency action against the borrower. In many situations, the statutes allow the lender to pursue such an action against a borrower after foreclosure…
When a borrower short sells a property, there is no automatic protection from a lawsuit by the lender for the balance of the note, unless the borrower is prequalified by the lender under the HAFA program. Although there are cases that suggest a purchase money lender may be not be allowed to obtain a judgment against the borrower for balance of the note if the property and loan also qualify for anti-deficiency protection in a foreclosure, borrowers must be sure to obtain a personal release from the lender to be certain they are protected. I am aware of situations in which a home owner, ecstatic to obtain the bank’s approval of a short sale, quickly closes a short sale without carefully reading and understanding the terms of the bank’s approval. In many cases, the bank has a right to sue and reserves its right to sue the borrower in the future for the balance owed on the note. It is also important to note that the 90 day limitation after a trustee’s sale for filing the deficiency action against the borrower/home owner does not apply in a short sale situation. Normal statutes of limitation apply and can run for up to 6 years in cases where the bank has the right to sue.
It is critical that all homeowners and realtors are aware of this important distinction and do not rely on misinformation when deciding whether to consummate a short sale transaction.
Schedule an Arizona Foreclosure Law or Short Sale Consultation with Arizona Real Estate Attorney Jeana Morrissey
If you have questions about Arizona foreclosure law and the legal consequences of defaulting on a loan secured by a lien on an Arizona home or questions about short sales or short sale contracts, you can hire Jeana Morrissey to review your situation and answer your questions. Jeana offers 30 minute short sale consultations and short sale document reviews. Jeana also offers a comprehensive a one hour in office or over the phone consultation for $349. Call Jeana at 602-906-4953 ext. 4 or email her at firstname.lastname@example.org.
To hire Jeana for a comprehensive document review and consultation about Arizona foreclosure law and alternatives to foreclosure, such as short sales, complete our online consultation agreement. To schedule a consultation, call Jeana’s legal assistant, Milena, at 602-424-4159.