This article will summarize the foreclosure process in the State of Arizona, which is governed by Arizona Statutes and is significantly different than the process in other states.

Foreclosure is a general term that describes the legal process that a mortgage company uses to obtain ownership of a piece of real estate where it holds a security interest in that real estate. In Arizona, the legislature has enacted statutes that make this a non-judicial process in most cases, meaning the lender does not need to file anything with the court to complete the foreclosure. This streamlines the process when compared to other states like Florida where each foreclosure requires a separate lawsuit and involves the procedural complexities that invariably accompany lawsuits.

Provided the mortgage company complies with the procedural requirements as set forth in the Arizona Revised Statutes, the completion of the foreclosure process, wherein a Trustee’s Sale is held and title transferred to the successful bidder, will terminate the homeowner’s ownership interest and entitle the purchaser to evict the previous homeowner if he or she has not vacated the property.

Although the lender can usually start the foreclosure process as soon as a homeowner is late with a single mortgage payment, most lenders will make numerous demands and try to work out some other solution before initiating the formal foreclosure process. While its impossible to predict how long a lender might take before taking this step, it is not unusual – particularly during these trying economic times – to see homeowners 3-6 months past due before a lender begins foreclosure proceedings. Significantly, as long as the homeowner is past due it is up to the lender to decide when it is going to proceed, and in some instances the lender may decide to wait many months or even years before foreclosing.

Most homeowners in Arizona have a deed of trust as opposed to a traditional mortgage, which allows the lender to foreclose without going to court. Arizona does, however, still have a mechanism whereby a foreclosure may be pursued judicially in the rare instance there is not a deed of trust or if the lender simply chooses to proceed judicially in lieu of foreclosing on the deed of trust. In some cases the lender may realize a financial advantage by going to court, so homeowners who are served with a lawsuit instead of a Notice of Trustee’s Sale should consult with an attorney as soon as possible.

To effect a non-judicial foreclosure in Arizona, the lender must appoint a Trustee, who is the person or entity that is legally entitled to sell the property in a Trustee’s Sale. The Trustee’s first action is to record a Notice of Trustee’s Sale in the county recorder’s office, which is a legal notice identifying the precise time and date, as well as the location, when the home will be sold. Arizona law requires that the Notice of Trustee’s Sale must be recorded at least 90 days before the sale date. The Notice of Trustee’s Sale must also be published in an appropriate newspaper and copies must be delivered to the homeowner and other interested parties.

Until the sale date, the homeowner may reinstate the loan by paying all the past due amounts, plus interest, costs and fees that may have been incurred. Homeowners familiar with the laws of other states should understand that Arizona’s non-judicial process does not provide for the ability to reinstate or redeem the loan after the Trustee’s Sale.

If the homeowner has not reinstated the loan, the Trustee may conduct the sale as provided in the Notice of Trustee’s Sale. The Trustee may also continue the sale to a later date by providing an oral notice of the continuation at the time and place set for the sale.

Bidders are required to provide a cash deposit to bid on the property, and the property will be sold at the Trustee’s Sale to the highest bidder. The lender may also bid by making a credit bid up to the amount owed on the loan. The successful bidder, except for the lender, must pay the amount bid less his or her deposit by the next day, or will forfeit the deposit and face potential liability to any party who suffers a loss stemming from that failure to pay.

The proceeds from the Trustee’s Sale are used to pay of the liens against the property according to their legal priority. In the event there are remaining funds after all the liens have been paid, the Trustee must pay the balance to the former homeowner.

After the sale the Trustee will convey title to the Property by executing a Trustee’s Deed, which constitutes clear title to the Property except for liens and encumbrances that are superior to the lien held by the foreclosing lender.

While this article constitute a general overview of the Arizona foreclosure process, it is impossible to contemplate every situation. If you are facing foreclosure or have questions about the foreclosure process, you should consult with an Arizona foreclosure lawyer to address your specific situation.