Arizona Home Loan Default

… is rather unique.

Arizona Foreclosures are simple

Most basic … in Arizona nearly all home financing is based on a trust deed, not a mortgage. With a trust deed foreclosure activities are relatively simple and consistent … and quick – just 91 days if the lender chooses to act promptly. For a more extensive discussion of mortgages verses trust deeds … click here.

Lender Non-recourse

Arizona is “non-recourse” for loans on residential real estate, which means that, irrespective of what the loan note or other documents may declare, the borrower is likely NOT liable for the deficiency between the debt amount and the amount the lender receives as a result of a short sale or foreclosure.

The Arizona attitude is that the lender is the “expert” regarding real estate values, got a professional appraisal, and agreed that the property was the collateral for the loan … so, in the event of default, the property is all that the lender deserves to get.

BUT WATCH OUT … there are exceptions, plus get help in reviewing the settlement documents coming from the lender to be sure all of your Arizona rights are inherent.

Default Documents

Just below are links to several resources relevant to loan default in Arizona. This list is far from exhaustive.

The Purchase Contract “Short Sale Addendum” is an Arizona Association of Realtors form (AAR) that will be part of the Purchase Contract for a short sale property. Of particular note is the content of lines 9 to 25. As indicated there, (1) a short sale can be “hung up” by the lender for months, possibly even a year; and (2) there really is no “contract” until the lender and seller come to an agreement on the settlement terms.

The Listing Agreement Short-sale Addendum is between the owner/seller and the Listing Broker that details the issues and difficulties that are going to be involved for a successful short-sale effort.

The Short-sale Agreement Notice is by the buyer to the seller to communicate that an agreement was reached with the lender so that the short-sale may proceed.




Buyer Advisory PDF Oct-2018

The Arizona Foreclosure Law Summary

Effect of Foreclosure on Credit Score

Lenders should report to credit bureaus a foreclosed loan as “charged off” after a foreclosure is completed where the borrower has no ongoing liability, as in Arizona for a home loan. But some lenders continue to report a foreclosed loan as “late”, particularly second-lien lenders. The borrower’s credit score is NOT healing as long as this is being done and there is little chance of another home loan as long as this is the case.

Within a couple of months after the foreclosure, borrowers should check their credit report to determine how their lenders are reporting their accounts. A borrower can obtain a free credit report once per year from

If a lender is reporting to the credit bureaus incorrectly, a borrower can take the simple approach and call the lender and request a reporting correction. If that doesn’t work, follow the formal written notice requirements. If that doesn’t work, contact an attorney.


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