As you might have heard, Arizona homeowners have some measure of protection after foreclosure due to our anti-deficiency statues. However, many homeowners don’t know what those statues are to recognize how they can be protected. The anti-deficiency statutes have three qualifications: (1) the home must be a single family unit or a duplex, (2) the home must be on a 2.5 acre lot or less, and (3) the home must be utilized as a dwelling. These qualifications limit the owner’s protection from being pursued by their lenders for outstanding balances on their loans in excess of the money earned from the sale of their collateral.
While the first two qualifications are clear-cut, there have been several court cases to define what “utilized as a dwelling” means. According to a 1986 court case, the meaning was expanded to include owners of tenant-occupied rental properties as long as their properties meet the first two qualifications. What some small investor’s don’t realize is that if their home is vacant for a period of time, they can be pursued for a deficiency judgment. If you are an investor of a vacant property and are concerned about the possibility of a deficiency judgment, please contact your attorney.
Conversely, even though Arizona is an anti-deficiency state, the lender can still make a condition of the short sale approval letter that the owner is to sign a promissory note for help cover the difference. However, the approval letter from the lender can have verbiage that the lender agrees to not pursue the homeowner for the difference. This is an extra measure of protection for the homeowner who can already be in a financial hardship.
Regardless of the anti-deficiency statues for Arizona, short sales are less detrimental than foreclosures to the owner. Short sales have a lower impact on credit scores, time to qualify for future home loans, credit history, and more. Short sales are typically reported to the credit bureaus as "Paid in Full for less than the Amount Owed" so there is no risk to current or future employment or security clearance. There are also multiple government and lender programs that are looking to help the homeowner through the short sale process by offering relocation incentives.
As one of the first Certified Distressed Property Experts in Arizona, I have been successfully helping homeowners short sell their homes since 2004. Contact me today at 480-355-8645 or gina@locatearizonahomes.com for a free short sale consultation!
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