Arizona Foreclosure Laws

Although both judicial and non-judicial foreclosures take place in Arizona, it is non-judicial foreclosures that tend to be more prevalent. A non-judicial foreclosure takes place when a Deed of Trust contains a provision known as a Power of Sale clause, which permits a lender to foreclose on a property if they find a borrower (homeowner) in default of payment. The lender can then issue a Notice of Sale, which names a date at least three months in the future upon which a foreclosure sale of the homeowner's property will take place. The homeowner has the power to stop the foreclosure up until 5:00 p.m. on the day prior to the scheduled sale by paying the lender the defaulted amount including any additional fees accrued for late payment.

In the case of a judicial foreclosure, the lender must file a lawsuit (known in this case as a Lis Pendens) against the homeowner stating the default amount owed. Notice of the Lis Pendens is sent to both the homeowner and any Junior Lien holders (lenders from whom thehomeowner might have received additional mortgage loans). If the homeowner does not respond to the Lis Pendens within a specific amount of time, the court can find the homeowner legally in default and schedule a foreclosure sale of the repossessed property.

Before the non-judicial foreclosure sale takes place, the lender (or trustee) provides a Notice of Sale to all affected parties (including the homeowner and all Junior Lien holders) at least three months before the sale date. Under Arizona foreclosure law, the Notice of Sale must also be published once every week in the local newspaper and posted both on the property in question and the county courthouse, in order to inform the public. The trustee must also provide the amount of the opening bid to anyone who asks with 24 hours of the scheduled sale. If the trustee does not provide this information, the sale may have to be postponed.

The foreclosure sale is run in the style of an auction, and ordinarily conducted by the trustee. The property is awarded to the highest bidder. Each participant must provide a refundable $1,000 deposit in order to bid. The trustee keeps the deposit of the winning bidder as a down payment. The winning bidder has until 5:00 p.m. the following day to pay the remaining balance of his bid. After this occurs, the trustee must transfer ownership of the property to the winning bidder within seven days. The proceeds of the sale go first to the primary trustee, and then to any Junior Lien holders. There is no right of redemption after a non-judicial foreclosure sale.

Judicial foreclosures are similar, but in this case it is the County Sheriff who conducts the auction, which usually occurs about 45 days after the initial court ruling. Anyone may bid without having to provide a deposit. The winning bidder has until 5:00 p.m. the following day to provide the full payment to the Sheriff, at which point a Certificate of Sale is issued. The original homeowner then has six months to redeem ownership of the property by paying the full sale amount plus any additional interest required. If this does not occur, any Junior Lien holders are given the same opportunity to redeem the property within a specific amount of time. If no one redeems the property, the Sheriff transfers ownership to the winning bidder.

Click here to begin your search in Arizona