Arizona Foreclosure & Short Sale Debt Attorney
Many people assume that a foreclosure or short sale will mark the end of the process and they can start putting their financial troubles behind them. That may not be true. In some cases, there may be potential liability for the amount of the debt that exceeds the sale price of the home, whether at foreclosure auction or after a short sale.
Foreclosure Deficiency Debt Liability in Arizona
There are several ways you could face foreclosure deficiency debt in Arizona. The term “foreclosure deficiency debt” refers to any debt liability you have after a foreclosure sale (also called a trustee’s sale). The deficiency comes from the property being worth less than what is owed, and that difference can become your liability after a foreclosure sale. In order to be protected from deficiency in Arizona, the following tests must be met:
- The property must be 2.5 acres or less
- Single one or two family residence
- Utilized as a dwelling
- The loan must be “purchase money”
Of course, analyzing whether a particular property or borrower fits within these tests can be much more complicated and requires a licensed Arizona attorney well-versed in mortgage law.
But here are some of the ways you could find yourself being pursued for mortgage debt after a foreclosure:
If you bought vacant land or a bare lot during the boom times, you could face a mortgage debt deficiency action after foreclosure. The reason is that, in most cases, vacant land won’t pass the various tests for anti-deficiency protection under Arizona law. It may be greater than 2.5 acres. And it often won’t be able to be a residence or utilized as a dwelling.
Many lenders are quite aggressive about suing borrowers for mortgage debt deficiency after a foreclosure on vacant land. Our firm is experienced in negotiating vacant land mortgage debt.
Similarly, most types of commercial property won’t meet the test for anti-deficiency protection in Arizona. This is usually because they aren’t a residence utilized as a dwelling. If you are a small business owner or commercial property owner who experienced a foreclosure, we can help resolve any remaining debt obligations. We are knowledgeable and experienced at negotiating debt on commercial properties. And we do it without bankruptcy.
Large Horse Properties or Agricultural Land
If your horse property or agricultural land is more than 2.5 acres, you may have mortgage debt liability after a foreclosure. The good news is, mortgage debt need not bankrupt you. Our firm is experienced in negotiating down the debt to a fraction of what the lender was demanding. If you’ve had a large horse property or agricultural land go to foreclosure, call us for a free consultation with an attorney.
HELOC or Second Mortgage Debt
Perhaps the most common reason for foreclosure debt liability is not meeting the “purchase money” requirement of the test. This can happen with HELOC or second mortgages sometimes. For more on that, see our page on HELOC & Second Mortgage Debt.
Short Sale Debt Liability in Arizona
First off, most successful short sales should not result in liability for the borrower. That is because the whole point of a short sale is to negotiate the debt down to the sale price, absolving the borrower of any liability post-short sale.
However, for a variety of reasons, including error or unusual circumstances, the lender may actually retain the right to pursue the borrower for the difference between the short sale price and the debt amount, even after the short sale. If you are one of the unfortunate people who find yourself in this position, we can help. Our firm can negotiate mortgage debt even after a short sale – and without bankruptcy.
We offer a free consultation with a mortgage attorney to discuss foreclosure and short sale debt solutions.