One of the BIG questions we are asked is: Will the bank come after me for the deficiency on my mortgage loan? Let’s talk about what is meant by deficiency and how that is handled during a short sale in Arizona.
What is a deficiency or deficiency judgment in Phoenix, AZ?
When a home owner sells his or her home by short sale there is a difference between what the lender receives from the sale of the property and what is owned on the mortgage, otherwise it would not be a short sale. The amount not covered by the sale is known as the deficiency. If the lender has a right to legally collect the deficiency amount from the borrower, it is known as a deficiency judgment.
What Is All The Talk About Anti-deficiency laws in Arizona?
If you are a home owner going through a short sale in the greater Phoenix AZ area, you may be lucky. Arizona is one of a handful of States that has laws that may protect a homeowner from a deficiency judgment. Yeah! However, there are conditions that have to be met for a homeowner to qualify. These laws were put in place to cover deficiencies during a foreclosure, yet they have been applied to short sales too. The conditions are relatively simple, yet have some caveats that need to be considered. Below are the basic conditions one must meet to be protected under Arizona’s anti-deficiency statutes.
- Have a single residential single family or dual family dwelling on 2 ½ acres or less.
- The money borrowed must have been used to purchase the property the day of purchase
- The property was not destroyed or diminished in value by taking appliances and other fixtures (note: the FBI is beginning to prosecute owners who strip the house before moving out. It is considered mortgage fraud and prosecuted by law.)
FYI: We are not attorneys and HIGHLY RECOMMEND you talk to a short sale knowledgeable attorney to determine if you are covered by the Arizona Anti-Deficiency statutes. There are many factors that will determine your eligibility.
In our little warning above we tell you to talk to an attorney to determine if you are protected or not. When you do so, we advise doing a little homework first. Think back through the time you’ve owned your home and make notes about the following:
- Have you refinanced the property?
- If so, did you take money out?
- Did your lender wrap the closing costs into the refinance?
- Do you have a home equity line of credit?
- If so, what was the money used to purchase? Look back through receipts and make an itemized list of anything purchased funds from your home equity loan.
- These items will be important for your attorney to know. He or she can provide good counsel only if they have good facts. Just another example of the garbage in, garbage out rule.
We hope this gives you a better understanding of what is a deficiency, deficiency judgments and anti-deficiency laws as they apply to short sales in downtown, north central and greater Phoenix, AZ
The Urban Team at Realty Executives
7600 N. 16th Street, Suite 100
Phoenix, AZ 85020
602-234-5777
gene@urbanteamaz.com