Legal Question in Real Estate Law in Arizona

Re: Owner Carry 2nds

If the buyer defaults on the 1st mortgage loan, the lender can foreclose, cause the house to be sold and recover from the proceeds of sale its loan amount due plus interest, penalties and costs of sale. The holder of the second lien would then be able to be paid its amount due, if there are sufficient proceeds to do so. If not, you lose your collateral. If the buyer defaults on the second, but not the first mortgage, you can foreclose, but the first lien holder gets paid first, and as above, you get what is left to cover what is owed to you. What you get, depends upon what the house sells for. I have seen cases where the borrower defaults, but the property value goes up so high that upon the foreclosure sale, the owner/borrower still walked away with money in hand, since he gets what is left after the debts are paid.

Re: Owner Carry 2nds

Some information is left out of your facts. Did you sell on a promissory note secured by a deed of trust? That is what most people use. Mortgages are technically used almost never in arizona. And I mean never.

I need to add to the response given already by other counsel. If you are in a second position, the first position has to give you notice of the sale. You have the right to redeem the property by a reinstatement prior to the sale, and then initiate your own sale and add the amounts you paid to the amount needed to reinstate from your sale. If no reinstatement is made, you can give a credit bid for the amount owed you, and if noone bids higher you own the property, subject to paying the first. In the past it was unusual for bidders to bid at many sales. Now it is common, due to the rise in values.

If you have waited until the sale is over and the borrower is removed from the premises, you may have waited too late. I wish you had consulted with us much sooner or with an attorney of your choosing.

When you are in a business deal, get attorney advice prior to signing contracts and upon breach of the contracts. It is the cheapest way to go. The expensive way to go is to represent yourself and not properly exercise your remedies.

Best regards,

James D. Jenkins

P.S. I do not do foreclosures as a trustee in my practice, but the above is according to my understanding. In our community we see many houses sold to "investors" before the trustee's sale because there are so many solicitors to buy houses in foreclosure.