Foreclosure in 85716>Question Details

Debrs10, Other/Just Looking in Arizona

What are the financial obligations f(legal cost) of a home in foreclosure and after the auction of the home?

Asked by Debrs10, Arizona Sun Apr 12, 2009

The home is in Tucson Arizona and will be auctioned in June 2009. I wanted to understand what the law is regarding the legal costs associated with the foreclosure. Is the owner responsible for those legal fees? How can you avoid them? Also if the home sells for less than what is owed, who is responsible for the deficiency? Is that taxable income?

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Jugging from your question, you should not attempt to buy at auction without working with a local real estate agent. Of course, you can educate yourself but this will take time. You could review your concerns with an attorney - around $500 - education is not free.
When you are buying at auction you are buying As-Is - if there are leans against property they will become your liens. You are paying lower price and accepting high risk - this is the name of this game. In most cases you will not have enough time to investigate potential risks.
It is much safer to buy REO - property already own by a lender or Short Sale which can be a "pain in the neck”. In both of these cases you are paying a little more but you know what you are buying.

Good luck
George from Tucson
0 votes Thank Flag Link Tue Jul 7, 2009
Hi Deb,

You want to know if your state is a judicial or non-judicial foreclosure state. Then you want to know if you have a recourse loan or a non-recourse loan. This will provide the answers. For a website that has a FREE one hour video on line please visit
0 votes Thank Flag Link Fri Jul 3, 2009
Although Howard hasdone a very nice job on providing a very good information here, as an agent, he cannot provide advice if that is what you seek. There is a venue, in which you will be able to ask these questions and more to Tucson experts.

We are providing a FREE informational seminar on saving your home from foreclosure. In attendance will be a local real estate attorney, a loan officer, an accountant, a REALTOR, and a short sale expert.

Learn more about your options for FREE!
0 votes Thank Flag Link Fri Jul 3, 2009
Most loans in Arizona are secured by a deed of trust, which allows the property to be sold at a trustee sale 90 days after the property owner who is not making their loan payments is formally given a notice of default. The notice of default is also posted, typically in a small local paper, to give public notice of the sale. The attorney for the lender then holds the trustee sale at his office or on the steps of the courthouse of the county where the property is located. At the "auction"; the attorney bids, on the lender's behalf, the full amount owed on the loan, plus all the back payments, late fees, and attorney's costs. If anyone shows up and bids a higher amount; they get the property and the former owner of the property gets any money paid that is over and above the trustee's bid. If no one bids; the lender pays the attorney his fees and gets ownership by a formal trustee's deed.

Arizona is a non-deficiency state. Most owner occupied homes are exempt from deficiencies. The lenders cannot go after the homeowners' other assets or put a lien against their income to recoup the losses. They can, however, do that with investment properties. (So most smart investment groups own their properties by corporate ownership or in limitted liability companies.)

When a home sells for less than enough to pay off the full amount of the loan; that is called a "short sale". The lender has to agree to accept a payoff in the sale that is short of what is owed in order for the sale to be completed. Many lenders will do this in order to take a small, calculated loss, rather than risk losing a probably larger amount through the foreclosure and resale process. The amount of the debt that is forgiven to facilitate the sale is technically income to the seller. Many short sale sellers in the past agreed to short sales that netted them nothing, only to find out later that they owed taxes on the amount of debt that was forgiven. The government eventually stepped in and made an exception in the tax law for people who were losing their homes (Not their investment properties.), to be exempt from the resultant taxes in 2007, 2008, and 2009.

If you are planning to bid at a trustee sale or try to purchase a short sale property; please make sure you consult a knowledgeable Realtor and/or real estate attorney before you commit any funds. Tthe short sale process can be a long, nerve wracking ordeal; but it can get you a house at a good price. If you're looking for a home at a good price in Tucson right now; your best bet is probably a bank owned ptoperty that is well done with the foreclosure process. You can also get great prices on ordinary resale homes whose owners are forced to price their properties in competition with all the lender controlled properties on the market. Interest rates are at record low levels and prices are down; so it's a great time to buy a home in Tucson.
0 votes Thank Flag Link Sun Apr 12, 2009
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