How does foreclosure work in Arizona?

Arizona leverages non-judicial foreclosures as one way of addressing delinquent mortgages. The state has one of the shortest routes to foreclosure nationally.

Important to anyone entering into a mortgage loan agreement should be the options available in the event that payments cannot be made on time. Lenders and loan investors alike must be protected against the potential losses that could occur in such a situation. There may be many steps in the process to correcting a mortgage delinquency but in some situations, foreclosure becomes the ultimate resolution.

When foreclosure actions can be initiated

The Arizona Foreclosure Prevention Task Force indicates that state law allows lenders are allowed to commence collection actions earlier than what some other states allow. In Arizona, a foreclosure sale may be pursued as early as the first day that a borrower is late with a payment.

How long foreclosure takes

Every state has different laws that govern the foreclosure process. According to Forbes, foreclosures take an average of 414 days to complete in the U.S. as a whole. In Arizona, however, that number is much lower. The state finishes foreclosures on average in a mere 229 days. For lenders, there is a big difference in being able to resolve a default in seven or eight months versus 13 or 14 months.

The foreclosure process in Arizona

Because Arizona uses the non-judicial foreclosure process, the courts are not involved. Instead, lenders are allowed to put a home up for sale at a public auction as explained by Property Radar. This is done through a third party who is identified as the trustee. A mortgage agreement should outline this process in a power of sale clause. Two steps involved in this process are the filing of a Notice of Default and a Notice of Trustee's Sale.

Alternatives to foreclosure

A deed in lieu of foreclosure is another way of handling loan delinquencies. The fact that Arizona's laws facilitate faster-than-average foreclosure resolutions than many other states may contribute to the fact that fewer lenders appear willing to resolve issues by deed in lieu of foreclosure.

In 2012, the number of deeds in lieu of foreclosure in Arizona dropped dramatically from the prior year. In contrast, neighboring California and Nevada saw the number of deeds in lieu of foreclosure jump in their states.

For a lender, one of the downsides to a deed in lieu of foreclosure is the potential to have to pay borrowers in order to obtain ownership of the property. The ability to complete a foreclosure in a relatively short period of time may not make this very attractive for transactions in Arizona.

Getting proper guidance

Foreclosure is a legal process and all steps must be properly executed. It is important to work with an attorney who understands the intricacies of foreclosure sales in order to avoid costly mistakes that may add time or expense to the process.