A foreclosure often results in the bank receiving less than the full amount owed on a loan. Whether banks may or may not pursue you for the balance due, or deficiency, depends on the application of a state’s anti-deficiency statutes. An anti-deficiency statute is a state law governing whether and when a lender may pursue a judgment following, or in lieu of, a foreclosure. Arizona has two main anti-deficiency statutes that provide protection to homeowners with qualifying property.
In order to qualify for protection of the anti-deficiency statutes, the property must be utilized as a single one-family or two-family dwelling and located on a parcel of property two and one-half acres or less. If the property meets these conditions, and most residences in Arizona do, then you may be protected from a deficiency judgment.
The first of the anti-deficiency statutes is A.R.S. § 33-729(A). This statute generally provides that a borrower who has loaned “purchase money,” or money used to buy the property, cannot pursue a deficiency judgment against borrowers This means that most foreclosed homeowners do not have to worry about being sued if their $250,000 house only sold at foreclosure for $100,000. The lender is prohibited from collecting the deficiency, in this case of $125,000, by application of the anti-deficiency statutes.
The second of the anti-deficiency statutes is A.R.S. § 33-814. This statute provides that, even if the loan at issue is not “purchase money,” the lender who has elected the remedy of non-judicial foreclosure to recover the property cannot pursue the borrower for the deficiency following a non-judicial foreclosure.
Even if neither of these anti-deficiency statutes apply, the time for commencing a deficiency action is short—within ninety (90) days of the sale—and a court must decide the property’s fair market value, so you may still have legitimate defenses that you will want to discuss with a lawyer As with most laws, there are numerous exceptions and distinctions that may apply so you should always consult with a lawyer about your particular circumstances to determine your legal rights and obligations.Contact the lawyers at the Dessaules Law Group today at 602-274-5400 to schedule a consultation.