The BS Show took a road trip to Phoenix today to meet with Doug Farnham, Director of Business Development for Thomson Conant Mortgage Mediation Group.

If you are a REALTOR in Arizona that works short sales you have most likely been told that Arizona is a non-deficiency state.

A deficiency judgment is a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. This option may or may not be available to the lender, depending on whether they have made a recourse or non recourse loan.

In a nutshell, it means that the lender cannot pursue the borrower for the difference between what is owed and what the house sells for in foreclosure.  There are of course exceptions to every rule so you should always seek legal advice to see how a short sale or foreclosure will effect you or your client.

We wanted an answer to some of the BS that we (and likely you) have been told regarding whether Arizona is a non-deficiency state and if so, under what scenario(s) would Arizona laws not apply.  We have heard different things from different people so we expected a vague answer from Doug as well. We were pleasantly surprised to find that Doug was a wealth of information.

The first thing that became obvious from talking with Doug is that Arizona’s anti deficiency laws are written in regards to foreclosure, not necessarily short sale.

Turns out, Arizona is a recourse state, which means that a lender could sue under certain circumstances for a deficiency. Doug outlined some of those scenarios below for us.

“The Arizona State Statute does not mention the actual words “short sale” so there has been some debate on whether or not short sales are included in the State’s anti-deficiency statues.”  Although he has not reviewed the actual case law it was his understanding that this defense has been used successfully in the case of short sales.

Doug says this is why it is best to negotiate a release from future liability with the lender(s) to avoid this entire issue.

We enjoyed talking  about short sales with Doug so much that we will be going back to see him next week to discuss next week’s topic: “Short Sales and the Security nightmare, Are You In Compliance?”

Did you know that there are compliance regulations that now apply to you, the REALTOR and your business as a result of collecting financial information to short sell a property? We hope to see you next Friday.

Doug can be reached at:

Doug Farnham
Director of Business Development
Thomson Conant PLC
Mortgage Mediation Group
(C) 602.326.6552
(F) 602.840.3290
email: dfarnham@tcmmg.com

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Tags: Deficiency Arizona, short sale

This entry was posted on Friday, March 19th, 2010 at 12:38 am and is filed under The B.S. Show. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.