Information for Homeowners Facing Loss of a Home

When A Trustee’s Sale (Foreclosure) May be Used

If you bought a home and signed a Deed of Trust giving the lender a security interest in your property, the lender can start a process to take legal action to sell the property at a Trustee’s Sale. The legal process can be started if you are in default – if you do not do what you agreed when the loan was given. Mostly this happens if you are behind on your payments.  

Steps the Lender Must Take to Seek a Sale of Your home

Usually as a required agreement in the Deed of Trust the lender will make a demand that you make your payment. If the lender sends this notice by certified mail, the process of forcing sale of your home can continue even if you refuse to pick up the certified letter. It is best at this point to get caught up and stop the process. If you don’t get caught up on your payments, the lender can start plans to sell the home by recording a Notice of Trustee’s Sale with the County Recorder’s office. This Notice sets the date, time and location that the Trustee’s Sale of your home will take place. You should receive a copy of this Notice of Trustee’s Sale and a Statement of Breach by certified mail. This Notice MUST give at least 90 days between the date the notice is recorded and the date the sale will happen. 

What You Can Do

We recommend that you talk to a lawyer to find out more about your options or hire a lawyer to assist or advise you. If you have low income and are eligible for free legal assistance, contact a legal aid organization in your county. If you are not eligible and do not know a lawyer, you can contact the Lawyer Referral Service of the County Bar Association. There is a small fee for a half-hour consultation.

Talk with your lender immediately. Most lenders will work with you if you are sincere and try to work something out with them. The lender may be able to arrange a repayment plan or the temporary reduction or suspension of your payment, particularly if your income has dropped substantially or expenses have shot up beyond your control. You also may be able to refinance the debt or extend the term of your mortgage loan. In almost every case, you will likely be able to work out some kind of deal that will avert foreclosure. If you have mortgage insurance, the insurer may also be interested in helping you. The company can temporarily pay the mortgage until you get back on your feet and are able to repay their loan. If your money problems are long term, the lender may suggest that you sell the property, which will allow you to avoid foreclosure and protect your credit record. As a last resort, you could consider a deed-in-lieu of foreclosure. This is where you voluntarily give back your property to the lender. While this will not save your house, it is not as damaging to your credit rating as a foreclosure. Exhaust all other viable options before making a decision.

*Do not pay money to someone else to negotiate for you with your lender. Some people take your money and make promises that they don’t keep. You should research the person or company you plan to hire.

Your Options after Receiving the Notice of a Trustee’s Sale

   1.     Pay the amount that you owe if you can pay the full amount including back payments, late charges, penalties and trustee’s fees before the date of the Trustee’s Sale. Ask in writing for the “reinstatement” amount and keep a copy for your records. Send the amount by certified mail, return receipt requested (arranged at the Post Office) so you can prove that you sent the money and that the lender received it. IF YOU PAY ALL THAT YOU OWE, BE SURE THAT YOU HAVE IN WRITING FROM THE LENDER AND TRUSTEE THAT THE TRUSTEE’S SALE HAS BEEN CANCELLED.

1. Refinance if you can qualify for the amount you owe including the past due mortgage payments. Contact several mortgage company’s to see if you qualify. DO NOT AGREE TO A SHORT TERM LOAN AT HIGH INTEREST RATES WITH PAYMENTS TOO HIGH FOR YOU TO AFFORD. If you are able to refinance, the arrangements must be made and documents signed and you lender paid before the date that the Trustee’s Sale is scheduled to happen.
2. Sell the house yourself before the date scheduled for the Trustee’s Sale. This option can allow you to pay the mortgage and stop the sale. This will keep a “Foreclosure” from being on your credit history. Depending on the circumstances you may be able to make arrangements with the buyer to lease the home back. As an opinion it is better to sell the property quickly yourself instead of letting it Foreclose. This avenue may also allow you to get some money so you can use to arrange for another place to live.
3. File a Chapter 13 Bankruptcy, if you have enough stated income to pay your regular payments and also pay your back payments during a period of years. Bankruptcy laws have changed. IF YOU ARE CONSIDERING THIS OPTION, WE RECOMMEND THAT YOU CONSULT WITH AN ATTORNEY WHO IS IN GOOD STANDING WITH THE STATE BAR (CHECK AT 602-252-4804) AND HANDLES CHAPTER 13 BANKRUPTCY CASES. If you qualify for this type of Bankruptcy, the bankruptcy papers need to be filed with the bankruptcy court before the date and time set for the Trustee’s Sale. IF YOU FILE A BANKRUPTCY THAT POSTPONES THE TRUSTEE’S SALE AND THE BANKRUPTCY CASE IS LATER DISMISSED, THE TRUSTEE’S SALE CAN TAKE PLACE LATER, AND YOU WILL NOT BE ENTITLED TO BE NOTIFIED ABOUT THE TRUSTEE’S SALE.

If you cannot use any of the options above –catch up on your payments or refinance or sell the home quickly or qualify for Chapter 13 bankruptcy – the lender can proceed with the Trustee’s Sale as scheduled.

DISCLAIMER

Arizona Property Mall does not provide legal advice; legal advice may only be obtained through direct contact with an attorney. Deadlines are extremely important in most legal matters. You may lose important legal rights if you do not retain an attorney immediately to advise you.

Remember time is Not on your side, you need to act quickly.

What You Can Do and Expect After Your Home is Sold at a Trustee’s Sale

1. Make arrangements to move. After the Trustee’s Sale, the house belongs to the lender or whoever bought it at the sale. The new owner has a right to have you move out so they can use the home.
2. See if you can get the new owner to rent you the home. This is not always easy to do.
3. See if the new owner will agree to give you a little more time to arrange to move. There is no legal requirement that the owner do this; but sometimes it is possible, especially if you agree in writing to leave by a certain date and not require them to go to court to evict you
4. Expect the new owner to give you a Notice to Vacate and then file a Forcible Entry and Detainer action in court to have the court order you to move out. This increases costs for the new owner, who can ask that you be ordered to pay them. If you receive this notice, we recommend that you go to court at the time set for the court hearing even if you already moved out. If possible, be sure that all of your belongings are moved before the court hearing or at the very latest before the date that the judge orders that the “writ will issue” (usually 5 days after the hearing). If you have not moved by the date that the writ issues, the new owner can have the constable or sheriff come to remove you that day and is not required to give you any more time to move. If this happens, you may have additional difficulties and expense.

Question: Can a home be sold for less than its mortgage?

Answer: Sometimes. But it is a complicated process and a lot will depend on the lender.
This process is called a “Short sale”, which occurs when a lender agrees to write off the portion of a mortgage that's higher than the value of a home. But, usually, a buyer must be willing to purchase the property first. A short sale may be more complicated if the loan has been sold in the secondary market. Then the lender will need permission from Freddie Mac or Fannie Mae, the two major secondary-market players. If the loan was a low down payment mortgage with private mortgage insurance, the lender also will need to involve the mortgage insurance company that insured the low down payment loan. The short sale can keep the homeowner from landing in bankruptcy or foreclosure. But it is not an easy procedure to approve, and it involves as much, if not more, paperwork than an original mortgage application. Instead of proving your credit worthiness and financial stability, you must prove you are broke. And any remaining difference between your home's value and the balance on your mortgage is considered a forgiveness of debt, which usually means it is taxable income. Updated information - You may qualify for an exemption if you meet certain rules. Check the irs.com website for information.