I'm sorry but I have to address Darrell's answer as it is the "poster-child" of why non-experts should not try to address technical questions.
My caveat: I advertise myself as a "Licensed, not practicing" CPA, as even though I have a Masters in Tax and worked for what was then one of Big 8 firms, I have not been doing taxes for some time.
Darrell, Lynn is referring to IRS income as what is being asked about is covered under Section 108 of the Internal Revenue Code, which calls for taxation on "Cancellation of Debt" income. This was temporarily suspended back in 2008, I believe, due to the preponderance of people undergoing foreclosures, short sales, deed in lieu of transactions, etc., all of which result in banks having to forgive portions of what was owed. This caused too many taxpayers to be forced to show huge"phantom" taxable INCOME amounts, while obviously in a financial position where they could not meet the tax obligation due.
Second, you start to discuss the anti-deficiency laws in Arizona as if there is a one size fits all answer. Which is misleading, not to mention the size allowed is 2 1/2 acres, not 5. There are so many nuances to these laws and related court cases, which are baffling to almost every tax accountant and attorney in Arizona. I am on the Tax List Serve for the Az Society of CPAs and no topic gets more questions and confusion than how to handle this very topic.
So, my point is not to make Darrell look bad, but more to warn people not to ask such a complicated tax question on a public forum and expect to receive an intelligent answer. Once again, I know some of the most brilliant tax minds in Arizona (I am NOT amongst them!!) and some not so brilliant (CPAs are only human..lol.), and would be glad to put you in touch with one of them who can answer your questions. Let me know.