The Arizona Anti Deficiency Statute - The Role it Plays in a Short Sale Transaction and an Explanation To Break it Down

The Arizona Anti Deficiency Statute - The Role it Plays in a Short Sale Transaction and an Explanation To Break it Down

Arizona is one of the few states that have an anti - deficiency statute. This legal statute was enacted to protect certain homeowners from being held financially responsible for any shortfall between the property's selling price and the amount of money owed to the lender. Arizona's mortgage deficiency statutes and the case law interpreting them can be complex; however, the explanation below can help lay it out better.

First, is the loan considered purchase money or non-purchase money? Even if 100 percent of the loan proceeds are used to purchase the property, a loan is considered purchase money. If a different residence is purchased, such as a vacation home, a loan secured by a borrower's residence is not a purchase money loan.

Next, determine whether the property that secures the loan fits within the definition of a qualified property protected by the Arizona Anti Deficiency Statues, meaning evaluate the property characteristics to be foreclosed on. Qualified properties protected by Arizona's Anti Deficiency Statues means a property of 2.5 acres or less and is limited to and utilized as a single-one-family or single-two-family home. Keep in mind that four single-family condo units are not a qualified property nor is a single-family residence under construction by a residential developer that is not yet sold nor occupied.

Now determine which of the following apply to the mortgage loan to be sued upon by the lender:

A purchase money loan secured by a qualified property.

A purchase money loan secured by a non-qualified property.

A non-purchase money loan secured by a qualified property.

A non-purchase money loan secured by a non-qualified property.

Finally, consider the fair market value limitation. A deficiency following a trustee's sale or a judicial foreclosure permitted against either a borrow or guarantor is subject to fair market value. The deficiency amount is calculated and limited to the difference between the loan balance due on the date of the foreclosure sale less the greater of the foreclosure sale price or the fair market value of the property on the date of the sale.

It is important to understand that not all properties fall under the protection of the Arizona Anti Deficiency Statute. Therefore, it is highly advisable to speak to an attorney to determine if your short sale transaction would be legally protected. Scottsdale Law Group can provide you with accurate, professional information so that you can make intelligent choices for your future. Scottsdale Law Group is assisting hundreds of clients with short sale transactions, bankruptcies and other means of asset protection and can be your professional partner through these complex and difficult times. To learn more about this topic and the legal guidance Scottsdale Law Group can provide, please visitwww.scottsdalelawgroup.com.

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