There’s a misconception amongst the Arizona communities that we have “foreclosures.” Even to this date, I have referred to the loss of a home in Arizona as the foreclosure process. I have technically been incorrect, even though we all know what it means.
In Arizona, we also don’t have Mortgages. We have Deeds of Trust, also known as Trust Deeds. In the event that you stop paying your payments, your lender has the right to throw their hands in the air and say, “forget it! You won’t pay your bills, so we’re going to sell your house out from under you.” They don’t hire attorneys to sue you through a Judicial Foreclosure.
Most lenders in arizona will start sending you notices that you’re past due, and eventually they’ll try to scare you with a Notice of Intent to Accelerate your note, which basically means they’re threatening to exercise their right as defined in your note to call the entire note due in full. This action is done on what’s known as a Trustee Sale Notice.
A Trustee Sale Notice is issued publicly, recorded with the county, and mailed to you, and posted on your front door. From the date this is filed, you have 90 days before the house goes on the auction block.
So, rather than hiring attorneys, filing suit, and taking your home through the lengthy and expensive Judicial Foreclosure process, they simply put your house up for sale at an auction.
So then what?
Well, the bank will set an opening bid, and often this opening bid is a completely unrealistic amount. As a result, nobody will bid on the property, and the only entity that will actually buy it will be the bank itself. Once that happens, you’re out of the house. If there’s a bona fide tenant living in the house, the new owner must give them 90 days notice to vacate.
So Does Judicial Foreclosure Exist in Arizona?
Sure. It exists. In Arizona, when your your lender notifies you that they’re going to sell your home at a Trustee Sale, you have the right to re-instate the loan and get caught up all the way until 5PM the night before the auction. If you do so, it’s possible that you could again default, in which case the bank would once again issue a Trustee Sale Notice, which you have a right to re-instate. There’s a point at which you may abuse this enough that the bank would finally just say “screw it, we’re going to start a Judicial Foreclosure.” It’s rare.
