New Law Limiting the Protection of Arizona Anti-Deficiency Statutes

By: Aaron M. Green and Christopher A. Combs

On July 10, 2009, the Governor of Arizona signed into law (effective September 30, 2009) a significant amendment to Arizona's anti-deficiency statutes. This new law decreases the protection to Arizona homeowners after they lose their home to foreclosure. The anti-deficiency statutes had not been amended since 1990.

The Arizona anti-deficiency statutes (primarily A.R.S. §33-814(G)) generally protect most homeowners from being sued after foreclosure by their lender for any unpaid balance of the loan, i.e., deficiency, if the home was "utilized" as a "dwelling." The Arizona courts have ruled that even vacation homes rented out by investors for only a few weeks of the year were being "utilized" as a "dwelling."

The new law states that homes must be utilized as a dwelling "by the trustor [borrower] under the deed of trust for at least six consecutive months...." (Emphasis added.) Therefore, occupancy of the home for at least six consecutive months prior to the foreclosure is now required.

Does the six-month occupancy requirement only protect owner-occupied homes, or do investors with tenants who meet the six-month occupancy requirement have the same protection? Our opinion at Combs Law Group is that investment homes will continue to have the same protection as owner-occupied homes under the anti-deficiency statutes.

Does the six-month occupancy requirement apply only to foreclosure of loans entered into after September 30, 2009, or to all foreclosures that occur after that date? Our opinion at Combs Law Group is that the six-month occupancy requirement applies to all foreclosures after September 30, 2009, and that the borrower will have to prove at that time the six-month occupancy requirement even though the loan documents may have been executed years earlier.

A copy of the new law can be found at www.combslawgroup.com.

If you would like more information regarding landlord/tenant, short sales, loan modifications, bankruptcy or other real estate related issues, please call our office at 602.957.9810 and arrange for an initial consultation with one of our attorneys.


Chris Combs

Certified Real Estate Specialist
Combs Law Group, P.C.

Are vacant homes selling any better than occupieds?

With almost half of the homes currently listed on Arizona Regional MLS being vacant, I'm just wondering how they are selling when compared to occupied homes. I decided to run some numbers and see if there was any correlation that suggests vacant homes are selling quicker. Typically a seller would want to get rid of a vacant home faster than if they are living there or have it occupied by a tenant but of course this isn't always the case. Let's take a look at some numbers and see if they have something to say.

I ran two sets of numbers-the entire ARMLS and then only Phoenix. I compared these vacant homes with sales from last month, October 2007. Currently we have 57,291 active listings with 27,815 being vacant, or 48%. Of those active listings, 9,942 are in Phoenix and 4,390 of those are vacant-44%.

As for sold homes in October, we had 3,467 sales out of our 57,000+ listings, only 6% of the entire MLS inventory. In Phoenix numbers were a little better, with 756 sales out of 9,942, 7.6% of the Phoenix inventory. Okay, now lets see how many of those sales were vacant homes. Of the 3,467 sales on the MLS, 2,103 were vacant, 60% of all solds. Phoenix was about the same, 441 vacant homes sold out of the 756 sales, 58%.

Now there's one more set of numbers that is interesting, what percentage of vacant homes sold out of the vacant listings? Remember that only 6% of the entire MLS sold last month, and only 7.6% sold out of the Phoenix inventory. Now let's see what that percentage is with the vacants. In Phoenix, 441 vacant homes sold out of the 4390 vacant listings, 10%. Compare that to 7.6% of Phoenix homes sold and you have a gain of 2.4%. Of the entire MLS, 2,103 vacant homes sold out of the 27,815 listings, 7.6%, an increase of 1.6% over the 6% across the board. So, there was more vacant homes sold than occupieds, but not a significant amount.

What kind of conclusions can be made from this data? To me, it suggests that vacant homes are selling better because sellers are financially "pinched" more-so than if the home is occupied by an owner or renter. The difference is small which shows that many sellers are simply not able to drastically discount these vacant homes because of lack of equity. Sales falling less than 10% of inventory is probably the most important number that we need to be concerned with. I know that everyone keeps saying it, but this really is a terrific time for buyers to find a great deal. Short sales are going to grow and maybe my next analysis will be to see how those sales are going.