AZ Foreclosure Realtor

ok, I’ve had TOO many homeowners asking the same questions, over and over and over. It usually goes something like this…

"I hired a Lawyer to help me with my foreclosure. He told me that the Lender can sue me for any losses they incur from the foreclosure sale, and garnish my wages the rest of my life until they’re paid in full…"

My Response - "Not if it’s a standard mortgage used in the purchase of your home (ie- wasn’t a small business loan or otherwise some other very odd loan). If it’s a single family or two-family residence, and is less than 2.5 acres in size, they CANNOT COME AFTER YOU FOR LOSSES!"

"But my attorney said…."

ok- here’s the proof. I took this right from the Arizona Revised Statutes, word for word. Go there, read them all for yourself. You’re looking for Title 33, Chapter 6, Article 2.  You can go there and read them all, word for word, or- here’s the important ones below. This is PROOF that they cannot come sue you, under the ‘normal’ circumstance! Take these to your attorney, and ask him to explain them to you, and see if he STILL thinks that the lenders can come sue you. ;)  -Please note- there ARE situations where the bank’s can sue you for their losses. However, 98% of the homeowners are NOT in those situations. You would know it if you were (ie- took out a business loan on the property, property is a large piece of land, larger than 2.5 acres, etc etc).

33-729. Purchase money mortgage; limitation on liability

A. Except as provided in subsection B, if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.

B. The balance due on a mortgage foreclosure judgment after sale of the mortgaged property shall constitute a lien against other property of the judgment debtor, general execution may be issued thereon, and the judgment may be otherwise satisfied out of other property of the judgment debtor, if the court determines, after sale upon special execution and upon written application and such notice to the judgment debtor as the court may require, that the sale price was less than the amount of the judgment because of diminution in the value of such real property while such property was in the ownership, possession, or control of the judgment debtor because of voluntary waste committed or permitted by the judgment debtor, not to exceed the amount of diminution in value as determined by such court.

 33-730. Limitation on deficiency judgment on mortgage or deed of trust as collateral for consumer goods

A. If both a security agreement and a mortgage or deed of trust have been given to secure payment of the balance of the purchase price of real property and consumer goods or services or the balance of the combined purchase price of such real property and consumer goods or services, no deficiency shall lie thereunder if no deficiency would lie under the mortgage or deed of trust given under such transaction, notwithstanding any agreement to the contrary.

B. For the purposes of this section, consumer goods and services are goods and services used or acquired for use primarily for personal, family or household purposes.

Man, these attorney’s must REALLY hate me right now. I’m ruining their retirement plans.

I am getting a lot of people asking me if they can gut the property, sell off everything for extra cash before the foreclosure sale. I will say this- yes, you CAN, if you want to be sued &/or thrown in jail. I promise you, the Bank has a lot more money to spend on Attorney’s than you do.

Many people want to sell the cabinets, doors, toilets, counter tops, etc to make some extra cash when they’re leaving. Here’s the problem with that- that is destroying the Bank’s collateral. They agreed to loan you money based off of the property’s current condition- and yes, they read the inspection report you got before they loan you the money. By taking that stuff out, you are essentially destroying their property value/collateral, and they CAN and WILL come after you later. They can sue you (and in some cases, find that you performed criminal activity and have you arrested), get a deficiency judgment against you, and garnish your wages until they recoup their losses. It’s not a pretty site to try to make a little bit of money. Contrary to popular belief, the bank owns your house until the day you pay off the mortgage (same with your car, for that matter). Yes, you may have TITLE to the house- but the banks OWN the house.

Here’s what I tell my clients- IF you are walking away, you can typically take your refrigerator (if it’s one you put in after you purchased- if it came with the home, LEAVE IT!) and washer/dryer. You cannot take: Stove, Dishwasher, Cabinets, Counters, Toilets, Sinks, etc. Do not trash the property when you leave, that is just a horrible statement of your integrity. Afterall, while you may be mad at the bank, you’re the one you agreed to make the payments and are breaking your agreement (in most cases). Leave the property in decent condition, take your personal belongings with you, and part your ways peacefully.

I’m going to explain how the banks get paid from a foreclosure sale. You may have heard of a bank getting ‘wiped off’ at the sheriff’s auction. This can happen from time to time. But it’s a big misconception that just because a bank goes to foreclosure sale, they’re going to lose everything they’re owed.  First, let me explain Lien Order.

Lien Order

Lien order is the method of figuring out which lender or lien holder has which position on a property. However, most people tend to forget about County Taxes, HOA, judgments and Mechanic’s Liens. To make it simple, here’s a list in order or priority.

1. County Taxes
2. H.O.A. (Home Owner’s Association, only if there is one in your subdivision)
3. 1st Mortgage
4. 2nd Mortgage (again, if you have one)
5. Judgments, Mechanic’s Liens, Hospital Liens, etc (if any at all)

The Lien Order is determined by the time/date that they were officially recorded. Essentially, it’s first come, first serve. Before there was a Subdivision, there was raw land. That raw land was within a specific County, say, Maricopa County. Since this was here long before your house, the County Property Taxes will ALWAYS be first position. When a house is foreclosed on, the County Taxes get paid first, before any of the banks. Next comes the Home Owner’s Association, since, the Association was in place long before your house was ever built (obviously, if you don’t live in a subdivision with an HOA, this position is eliminated).

Now the fun begins. The next positions go chronologically, in order of earliest date first. If you initially bought your house and had a loan from Wells Fargo Bank, they would be in 2nd position. If you have a HELOC (Home Equity Line of Credit),  Swimming Pool Loan, or other mortgage, it typically comes next. Then if you have any judgments or Mechanic’s Liens, those will come after. Now, this is not always the case, as you’ll see in my next example.

Let’s say you have a 1st & 2nd mortgage. You also have a Hospital Lien for $2500. You then decide to refinance your 2nd mortgage, but somehow in the process, the hospital lien doesn’t get paid off. The Hospital Lien now slides up a slot, and your new 2nd mortgage sits behind it. So it would look like this:

1. County Property Taxes
2. HOA
3. 1st Mortgage
4. Hospital Lien
5. 2nd Mortgage

This is unusual and most likely was unintentional- probably happened within the Title Company when closing on the refinance of the 2nd mortgage.

 How Much Does the Bank Get from the Foreclosure Auction?

 Now that you understand Lien Orders- let’s move on to figure out why a bank would get ‘wiped off’ or not. Let’s say you owe $150,000 on a first mortgage, and $50,000 to a 2nd mortgage. You also have a $25,000 Hospital Bill against your property from an accident 6 months ago (let’s just assume they’re in 3rd position). It would look like this:

1. $150,000 to Wells Fargo
2. $50,000 to Greenpoint Funding
3. $25,000 to Banner Baywood

Let’s assume that Wells Fargo is foreclosing on you. At this time in the market, most investors are paying 65-70% of the home’s value at the foreclosure sale. Assuming your home is worth $250,000, you might expect them to pay $165,000 at the foreclosure sale. So which bank gets paid how much? In this scenario, let’s assume your property taxes and HOA are current. So Wells Fargo would receive $150,000 and be paid in full. The remainder of the $15,000 would then go to the 2nd mortgage, Greenpoint Funding. You owed them $50,000, but they only received $15,000 of that. The $25,000 Hospital Lien would then be considered ‘wiped off’.

Let’s look at another example. Let’s say your first mortgage is owed $200,000, and the 2nd mortgage is owed $25,000. The house goes to the Trustee’s Sale and sells for $180,000. The remaining $20,000 owed to the 1st mortgage is now considered a loss to the bank. The $25,000 2nd mortgage has now become wiped off completely- they didn’t get paid a dime.

This can be much more in depth and complex, but I hope it gives you a basic idea of figuring out what the bank will get paid from the foreclosure sale. In future posts, I’ll answer questions about REOs, Overages, and Homestead Exemptions.

If you’d like to hire me to help you with your foreclosure situation- please contact me immediately. My services are typically FREE to you as most of the time the BANK pays my Realtor fees!

I’ve been getting many people asking me about the eviction process after the foreclosure sale. If you recall from my previous Article titled "Timeline to Arizona’s Foreclosure Process", we talk about the potential of being evicted from your house after the foreclosure sale. Essentially- here’s the breakdown.  Two Things happen at the foreclosure sale- either an investor buys it, or, it reverts to ownership by the bank. Each one follows different processes of things to come.

If an investor buys the house at the foreclosure sale, most likely within a few hours to a few days, someone will be knocking on the door. They will inform you that they are the new owners of the property. Some investors will try to work out a solution with you immediately, which entails you renting the property back from them for a period of time- they may even give you the option to purchase the property back (almost always at an inflated price!) at a later date in the future. Or, they’ll ask you to leave immediately and vacate their property. Technically, you are trespassing on the property, since you are no longer the owner of it. If you refuse to leave, they will be required to get an Eviction Order from the court. This process can take anywhere from 2-4 weeks, depending on how busy the courts are at that time. Once they receive an eviction order, they then hire the Sheriff to come and ‘escort’ you from the premises. You will be arrested if you refuse to leave at that time. All of your belongings are then stored for 30 days until you claim them (with fees due!).  If you do not claim the belongings, they revert to the ownership of the investor, and they will most likely sell them off, or give them away.

If the bank takes the property back at the sale, they will send someone to inspect the property and change the locks. If you are still residing in the property,  they will file for an eviction order from the court. Again, the same process follows as previously stated. Now, I’ve seen some banks take as long as 6 months to get to this point, however, most will take 1-2 months on average.

The problem here is that you never know what’s going to happen, depending on who buys the property at the sale. Your best bet is to not stick around to find out. Technically, you are living in someone else’s property, without their consent. It is always best to move out as soon as possible and avoid any legal actions. Most investors will work with you and give you a few days, if you are already in process of moving out. However, the longer you are there, the more money it’s costing them- so they will be fairly anxious tohave you leave as soon as possible.

UPDATED: Read "Eviction Process is Now Faster Than Ever"

If you have any questions, or are facing foreclosure, please contact me for free advice.

Many people here in Maricopa County, Arizona are finding themselves facing foreclosure on their home. Every single day, between 40 and 160 homeowners officially start the foreclosure process. That’s every day, Monday thru Friday, 40-160 NEW Foreclosure notices are issued. In my 7+ years of experience in the industry, I’ve found that most do not understand the foreclosure process, feeling lost and helpless in their situations. I’d like to outline the foreclosure process step by step to shed some light and educate homeowners as to how this works. Hopefully you’ll see that you have options at your disposal. In future posts, I will explain the Truth about filing Bankruptcy (what the BK Attorneys don’t want you to know!), loans, scams, and all the options for someone facing a foreclosure process. If you are behind on your mortgage payments and are concerned about foreclosure, please contact me to discuss your situation, and I’ll give you a straight forward, honest answer as to the options you have.

Stage 1: Life Happens

At some point, life happens to everyone. It’s not ‘IF’ it happens, it’s ‘WHEN’ it happens. It happens to all of us. Even my own family has been through it, losing my childhood home back in the 80’s. Every family I have worked with shares this in common. A family member passes away, a spouse was injured in a car accident and couldn’t work, someone loses their job and couldn’t afford to be one paycheck behind, an ugly divorce causes a major loss in income and support, addiction or other medical problems. Typically, it’s a combination of some of the above. You struggle and struggle, borrowing money, transferring from credit cards, doing every thing you can to get the mortgage paid. Eventually, it’s just not enough, and things haven’t turned around fast enough to get back on top. You miss a payment to the bank.

From the point of the first missed payment, the bank starts calling, and calling, and calling. They do everything they can to get you to make the payment you’ve missed, and now the new payment that’s due. They’ve tacked on late fees as well, making it even tougher to get back on top. You might even send in a partial payment hoping that it’ll keep them off your back for a while, long enough for you to make some more money. They certainly take that partial payment, and continue to harass you for the rest. From this point on, it just snowballs on you, and things go downhill rapidly every day. More interest, more late fees, more payments missed.

Up until now, you are not in foreclosure. A typical lender will wait a minimum of 3 months with no payments before they start the foreclosure process. I’ve seen banks wait as long as 18 months before starting, however, the majority of them will wait until you’ve missed 3 payments in a row before they start foreclosing. Keep in mind that they can start as soon as you miss one payment- but a foreclosure is very costly for a bank, and they want to give you every opportunity possible to catch back up on the mortgages before going down that path. Eventually, they grow tired of waiting, and start foreclosing.

Stage 2: The Foreclosure Starts

After about 3 months of non-payment, the bank will start the foreclosure process. They transfer your ‘file’ to their "Loss Mitigation" or "Foreclosure Department", and have an attorney file the appropriate documents required. This can take 1-3 weeks to complete. At this point, they are now incurring legal fees, and pass those fees right to you. Now you’re 3 months (or more) behind on the regular payments, plus late fees on those payments, plus now attorney’s fees. An average foreclosure here in Arizona costs $2500 in legal fees, start to finish. It can be more or less, depending on the attorney and specific requirements for your case. In order to bring your loan current and stop the foreclosure, you must pay all these fees in full. Sometimes a bank will work out a payment plan, or, "forbearance agreement" with you (more on that in a future post).

The Attorney draws up a document titled "Notice of Trustee’s Sale" and files it with public records (the Recorder’s Office). The day the attorney (also called the ‘Trustee‘) files the documents with the state, the time clock start ticking. The State of Arizona and Maricopa County Laws state that a lender has to allow a minimum of 90 days from the date the Notice of Trustee’s Sale is filed before the bank can hold the auction. At this point, you are considered to be in ‘Pre-Foreclosure‘. Now, it’s very important to understand that you still own your house at this point. You are still free to sell or refinance your home at any point up until the day of the foreclosure sale. The bank does not own your home, but merely a ‘lien’ or financial interest in it. It is still your home until the day of the sale.

The Notice of Trustee’s Sale is an announcement to the public and other lien holders that there is an action being taken against your home. It is a public record, anyone has the right to have access to this document. In this document, it will state the date, time, and location of the upcoming foreclosure sale. It will also state the name of the foreclosing entity (The Bank), the original loan amount, a file number (not your account number) and the Trustee’s Office information. The Trustee is the lawyer the bank hired to foreclose on your property. Most of the time you can get faster answers from them than you can the bank itself. The Trustee then hires someone to deliver and post the Notice on your front door of your home. Due to the high volume of foreclosures we have here in Arizona, this can typically take 3-6 weeks before delivery. So, 1/2 of your 90 days in pre-foreclosure have already passed before you’re officially notified of the pending sale.

So to recap, most banks will wait until you’re 3 months behind on payments to start the foreclosure sale. They then hire an Attorney to start the foreclosure sale. From the date the notice is filed at the Recorder’s Office, there is a minimum of 90 days before they can foreclose on your property. This is to give you an opportunity to make up the back payments, sell the home, refinance, or file bankruptcy.

Stage 3: Here Come the Vultures

Even though you haven’t seen the foreclosure notice yet, many other groups of people have. Investors, Bankruptcy Attorneys, Loan Officers and many others research the new foreclosure notices on a daily basis. They typically find out your home is in foreclosure hours after being publicly recorded. They track down your phone number, where you work, your family members, come to your home and knock on your door, whatever it takes to get your attention. They LOVE mail. You’ll know you’re in foreclosure when you start receiving hundreds of pieces of mail every day. They’ll even FedEx envelopes to you hoping you’ll read their mail over all the others. I call these the vultures.

There are many, many reasons why these guys are ’stalking’ you down. Obviously, they want to make money off of your situation. That’s not always a bad thing- many of these guys provide a valuable service and deserve to be paid for their efforts. However, there are some scam artists in the mix, and I’ll be teaching you later what to watch out for. Keep reading to learn about all the ways these guys work, and how they can ’steal’ your house and equity from you.

The important thing here is to NOT SIGN ANYTHING without consulting a professional first. By professional, I mean someone who is licensed and actions are monitored by the state. For example, a Lawyer or REALTOR® both have a Code of Ethics they must abide by. As a Licensed REALTOR® myself, I have strict guidelines as to what I can and cannot do, and there’s not one single transaction that is worth me losing my license. Not to mention the impact my reputation has in the business is extremely valuable to putting food on my table each month. No matter how comfortable and trusting you feel of someone, ALWAYS consult a professional before taking any action. Please note that most professionals don’t have the specialized training it requires to handle these types of situations.

Just because they are licensed, doesn’t mean they know how foreclosures work. There are professionals in the industry who specialize in foreclosures, and those are the ones you want to work with. The problem most people have with hiring lawyers is, if they don’t have money to pay their mortgage, they certainly don’t have money to pay $300/hr for a lawyer’s help. A phone call to a Licensed REALTOR® costs you nothing, and they only get paid if they sell your house. If they can’t help you, it costs you nothing. I am a Licensed REALTOR® specializing in foreclosures for the past 7+ years. If you’d like to speak with me about your specific situation, please feel free to contact me and I will work with you to figure out all the options you have.

Stage 4: The Foreclosure Auction

You’ve been in pre-foreclosure for 90 days now. You’ve had all kinds of vultures knocking on your door, sending you mail, calling your work and family members- you’ve even changed your phone number. The sale is just around the corner, and you don’t have the money to catch up the back payments, late fees, and legal fees. You may have figured out a place to go, a new house or apartment to rent, or a family member who will take you in until you get back on your feet. Here’s what happens at the foreclosure sale.

Investors line up at the location of the sale, typically, at the courthouse steps in downtown Phoenix. A lawyer announces the file number and address of your property, as well as an opening bidding amount. The opening bid amount is set by the bank- and it’s typically the amount of all back payments, fees, and unpaid principle (essentially, everything owed on the note). If an investor wants to buy the house, they start the bidding. It’s just like what you see on tv or the movies, the highest bidder wins and the case is closed. The winning investor now has 24 hours to pay the bank in full for the property. If he fails to do so, the bank sets a new auction date, typically 30 days later, and auctions is off again. An important note here- the winning bidder does not own your house until he pays the bank in full by the next day. Once he does, the Attorney holding the auction issues a ‘Trustee’s Deed‘ to your property, and he is now the legal owner. Pretty soon you’ll be hearing a knock at your door telling you the property has been purchased, and that you must vacate the premises. At this point, you are Trespassing on someone else’s property.

If you refuse to do so, the new owner of the property now has to go to the court and get an eviction order against you from the judge. This process usually takes up to 3 weeks. Once completed, he now must hire the Sheriff to evict you from the premises. The Sheriff will show up and arrest you if you do not leave freely. The investor now flips the house to another buyer, or holds it as a rental home.

Stage 5: The Aftermath

You’ve now moved out and into a new home. The house is but a distant memory that you’d like to put far behind you. But what happens next? Can the bank come after you for their losses? What about your credit, will you ever be able to buy another home again? Keep reading, there is hope on the horizon.

President Bush has just signed a new law that states any homeowner who lost their home to foreclosure cannot be taxed for those losses. That’s right, as of now, you are not responsible for paying taxes on the losses the bank incurred. That’s great news for the 3,600 homeowners a month now facing foreclosure in Maricopa County, AZ! There is also something called a Homestead Exemption, which is a State Law here in AZ. It basically states that any creditor cannot come after you for any judgments or liens they may have had against you or your property, up to $150,000 after the amounts owed by the mortgages. In other words, if you owed $200,000 to the bank, and had a mechanic’s lien of $100,000 after that- the mechanic’s lien got dissolved in the foreclosure sale. Now, there are exceptions to this law (for example, 2nd homes or rental property, and Federal judgments), but for the most part it applies. I’ll write more about this in the near future.

However, your credit report has now been trashed. It will show all the months late on the payments to the bank, as well as a FORECLOSURE. This will have a significant impact on your credit score, dropping it too far below for anyone to issues you another loan anytime soon. Typically a foreclosure will stay on your credit report for 7-10 years. This can be devastating to your ability to purchase a new home anytime in the future. There are ways to improve your score, and even get the FORECLOSURE taken off your credit report. I’ve worked with people who purchased a new home barely 2 years after losing one to foreclosure. It’s all up to you and how well you can get back on track. Contact me for more information about improving your credit score and removing bad marks off your credit report.

I hope this clears up the foreclosure process for you. There are many, many more details beyond what I’ve written here, but this will give you a good enough overview to work with for now. Foreclosure is a complicated and sticky process, nothing in it is ever easy. In future posts I will write about all the options you have if you’re facing foreclosure, and some of the scams that many people get taken by. If you are facing foreclosure, please feel free to contact me to discuss your situation. I will explain your options and let you know exactly where you stand. The call and advice are free, and the sooner you contact me the more options you have available to you.