It is frightening to receive a Foreclosure Notice. They are always very official looking, serious and direct, with seemingly little hope for a favorable resolution.

But which Foreclosure Notice have you received? Let’s take a step back and look at the Foreclosure process.

Foreclosure is the process by which a mortgage holder (Lender) legally forces the sale of your home due to non-payment of the home loan(s).  Foreclosure in Arizona is different from most states as lenders do not hold a mortgage on your property;  a Deed of Trust is used instead.

Mortgage or Deed of Trust?

Wait a minute!  I used the term “mortgage holder” above yet I just told you that mortgages are not used in Arizona. This is true, but the term “mortgage”, while technically not accurate, is often used as most everyone quickly recognizes it as referring to a home loan.

What is the difference between a Mortgage and a Deed of Trust? With a mortgage, foreclosures must go through the court system; a judge must order the foreclosure. A Deed of Trust, however, is a Non-Judicial proceeding in which the court is not involved.

A Deed of Trust benefits the Lenders (“mortgage” holders), as it is less costly and takes about half the time. It is usually a state-wide election; you either reside in a “Mortgage” state or a “Deed of Trust” state.

Types of Foreclosure Notices

Lenders will send out delinquent notices if you are late in your monthly mortgage payment. The letters will become increasingly demanding until the Lender uses the term, “Foreclosure”, which is often when homeowners become seriously concerned.

These are not true “Foreclosure” notices but are warnings that lead up to one.  Each Lender has their own rules and process they follow, but I have found that they often do not start actual Foreclosure proceedings until you are three or more payments behind.

Once the Lender makes a decision to start Foreclosure, an attorney will start the process.  The first step is to schedule a “Trustee Sale”, which must be set at least 91 days from the time the notice is recorded with the County.    

A Notice of Trustee’s Sale sets the Foreclosure date.  This is the actual Foreclosure Notice, and while it does establish a date when you may lose your home, it is not uncommon for the sale to be postponed.  For example, if your home is currently on the market and you have received a valid Purchase Offer, a Lender may postpone the Trustee Sale to opt for a less costly Short Sale.

How Do Trustee Sales Work?

A Trustee Sale in Pima County is held every weekday at the Courthouse in downtown Tucson.  The property is auctioned off to the highest bidder, who must deposit $10,000 at the time of sale and pay the balance within 24 hours.

The highest bidder, however, is often the Lender.  If the bid is too low, the Lender will keep the property and sell it on the open market.

How Do I Stop Foreclosure?

Stopping Foreclosure is easy; simply make up all of your back payments and be current on your home loans. Unfortunately, this is usually not an option as the lack of funds to make these payments is the reason homeowners are in this fix. 

Lenders will sometimes delay foreclosure proceedings if your home is for sale and/or you have an offer on your property.  If you have exhausted all of your options with your Lenders, then perhaps you should put your property up for sale as it will have less of an impact on your future ability to buy another home.  

If you put your home up for sale, then you will probably need to “Short Sell” your home. A Short Sale is when a home is sold and the Lender receives less than is owed on the property - they are “Short” a portion of the loan balance.

With a Foreclosure, you will likely need to wait seven years before you can purchase another home. In a Short Sale, you may be able to purchase another home in as little as two years, depending on how the sale is reported to the credit reporting agencies.  In any event, a Short Sale is always better for your credit score than a Foreclosure.

To Short Sell your home, contact your legal or financial advisor first to see what your options are. If you decide to sell after speaking with them, then contact a Realtor experienced in Short Sales.  It is not enough to be an experienced Realtor; it is critical they have Short Sale experience due to the time and complexity of these transactions.

Rob & Catherine Hallberg are experienced in representing both Sellers and Buyers in Short Sales. We would be delighted to help you; however, I recommend visiting our Short Sale page first for details and guidance on what this entails.