HomeSellers : Short Sales : The Trustee Sale Process
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Peoria, AZ 85383
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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.

For 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 recorder’s 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.
 
Many 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 Recorder’s 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
     • Provide a Deed-in-Lieu of Foreclosure (mail the keys back to lender)

If the homeowner doesn’t move forward in any of the above options, and doesn’t file bankruptcy, then the Trustee Sale will proceed on the scheduled auction date at an attorney’s office or at the County courthouse.

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 doesn’t 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.