What is a Trustee Sale and how does it happen in Arizona?
There are two types of foreclosures: judicial and non-judicial foreclosure.
Arizona is one of 13 states that process non-judicial foreclosures, also known as a Notice of Trustee Sale. Although more time
consuming and costly, lenders and mortgage companies still may retain the right to process a judicial foreclosure in certain circumstances.
Because judicial foreclosure is less frequently used in the state of Arizona, let's focus on the process of a non-judicial foreclosure.
a lender to move forward with a trustee sale, a homeowner must be at least 90 days past due on their mortgage payment(s). On
the 91st day, the lender, also referred to as the beneficiary, has the legal right to begin the foreclosure process. The lender
will file a Notice of Trustee Sale with the County recorders office where the property is located. Once this notice has been
recorded, a copy of the notice is delivered to the homeowner or anyone else that has an ownership interest in the property.
times the lender will tape the notice to the front door of the property, mail the notice or send it by a delivery service such as
Fed-Ex or UPS. According to Arizona law, the Trustee Sale Auction can only occur after the Notice has been properly recorded
with the County Recorders office and a period of 90 days has passed. So understanding this timeline, it may take 180 plus days
at a minimum before a sale will occur after the first missed mortgage payment.
Prior to the auction, the homeowner has the right to
do the following:
Bring their loan(s) current by paying all past due payments
Work out a loan modification with their lender(s)
Short sale their home
a Deed-in-Lieu of Foreclosure (mail the keys back to lender)
If the homeowner doesnt move forward in any of the above options, and
doesnt file bankruptcy, then the Trustee Sale will proceed on the scheduled auction date at an attorneys office or at the County
Prior to the scheduled sale, the lender will determine a credit bid or opening bid for the property. This is normally
the amount that the lender is willing to pay for the property or will allow an investor to purchase the property for at the sale.
If, at the time of the trustee sale, a third party investor doesnt bid at least the minimum credit bid, then the property reverts
back to the lender or beneficiary.
Once the lender takes ownership of the property, it is then referred to as a bank owned
property or as an REO (Real Estate Owned) home. When ownership of the property reverts back to the lender, they will assign
it to an asset manager who will then hire a real estate agent to sell the property for the bank or beneficiary that owns the property.