Foreclosure Process Overview
Both judicial (in-court) and non-judicial (out-of-court) foreclosures occur in Arizona, although judicial foreclosures are not common in the state. The typical timeline for an non-judicial foreclosure is at least three months from the date the first notice of foreclosure sale is filed to the date of the actual foreclosure sale.
* Judicial Only
The judicial foreclosure process begin when the lender files a lawsuit against the borrower and records a notice of the pending lawsuit (known as a Lis Pendens). The court filing includes the debt and default amount. The borrower and any junior lien holders are notified of the pending lawsuit either in person or by publication. If the borrower does not respond to the court action, the court can rule against him and set the amount owed to the lender.
The non-judicial foreclosure process is initiated if a clause in the trust deed permits the lender to sell the property upon the borrower’s default. To start the process, the trustee records a Notice of Trustee Sale (NTS), and the sale occurs at least three months after the notice is recorded. Until 5:00 p.m. of the day before the sale, the borrower, or any junior lien holders, may stop the foreclosure by paying the default amount owed plus any fees and costs.
Notice of Sale / Auction
In the case of a judicial foreclosure, when the borrower does not respond to the pending lawsuit the county clerk then directs the sheriff to conduct a sale of the property to recover the amount owed. A Notice of Foreclosure Sale (NFS) is then published and recorded and the sheriff is charged with conducting the sale of the property about 45 days thereafter. The sale is a public auction, at which anyone may bid. The winning bidder must pay the full price to the sheriff by 5:00 p.m. the day after the sale. Once that occurs, a certificate of sale is issued.
If the property is not abandoned, the redemption period is six months from the sale date. If the borrower does not redeem within that period of time, any secondary lenders may do so within a specified time. To redeem the property, the total amount owed – plus any fees and costs – must be paid. If no one redeems the property, the sheriff transfers ownership to the winning bidder.
In a non-judicial foreclosure situation, a Notice of Trustees Sale (NTS) is published. The NTS contains the property description along with the date, time and place of the pending sale. The notice is recorded, and the trustee mails the notice to all affected parties at least three months before the sale date. The notice appears in a local newspaper once a week for four weeks, with the last notice published no less than 10-days before the sale date. At least 20 days before the sale, the notice is posted on the property and at the county courthouse. Starting the day before the sale, and up to the sale, the trustee must provide the opening bid of the sale to anyone who asks or the sale may have to be postponed.
The trustee (or the trustee’s agent) conducts the sale at the property either at the courthouse or at the trustee’s office. All bidders must provide a refundable $10,000 deposit in order to bid; and the trustee keeps the deposit of the winning bidder. The sale can be postponed up to 90-days before the originally scheduled sale. The winning bidder has until 5:00 p.m. the next day to pay the full bid price, after which the trustee transfers ownership of the property within seven days. The proceeds of the sale are paid to the primary lender, then to any secondary lenders. There is no right of redemption for the borrower after a non-judicial foreclosure sale.
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