The temptation to buy foreclosed property leads many to make a move before they have thoroughly researched the law to determine how they may be personally impacted by the decision. In September 2009 Section 33-814 went into effect before legislators or voters figured out what it meant for those buying Arizona foreclosure property and the results have been disastrous.
When the Senate bill was passed it was found there was so much confusion and so many loopholes that few could figure out what it really all meant or how it was going to work. The revision was suppose to clarify the law but, in fact, has packed the courts with lawsuits that are leaving many destitute and without options. Additionally, since changes will be many years coming, new buyers of these properties are having second thoughts and for good reason.
Those promoting revision claimed that the current law was designed to protect those reselling a foreclosed home, such as a bank, from loosing money on the deal and making it harder to foreclose in the first place. However, the result was an interpretation of the law that allowed lenders to file a deficiency judgment against the property if the sale price was less than the debt owed. This addition not only left the former owners unprotected, but also placed a lien against the property so new owners were unable to resell until the old debt was resolved.
Another issue was confusion about residency. Although the law had a residence clause, with the revision it didn’t matter if someone resided in the property or not, it could still be sold out from under them. This also affected those absent from the property while on an extended vacation (30 days or more) or in the hospital in which case the property could be seized and sold if a payment was missed. It was up to the homeowner to prove residency, which was more difficult than at first thought. Additionally, this new revision did not explain whether all loans fell under these mandates or only those who were purchased after September 2009.
There are many issues associated with the new law that will take many years to sort out in appeals court. It is here that new laws receive interpretation, but so many judicial actions are now underway they may never sort it all out. The end result could be a repeal of the law that leaves lenders in financial straits, old owners permanently losing their property, and new owners not knowing where they stand. Eventually, new owners may find they have spent a ton of money and have nothing to show for it in the end.
The concern that those who default on a loan and lose the property in a foreclosure sale may still owe for the original amount of the loan, is making many reconsider this option and lenders ever more leery of taking on new mortgages. Most problematic is what happens to new buyers? Legally, does that mean that the lien placed on the property is forever if the debt is not repaid and what happens if they choose to resell, do they have to pay off the previous debt first?
The cost of a good defense attorney is high, but it is these people who will fight in the courtroom to decide the fate of the foreclosure market. This may mean not only those losing a home, but new owners as well may be required to fork over hard-earned money to ensure that their rights are protected. All of this can be avoided, however, if one is aware of what they’re getting into prior to making a commitment.
For those considering the purchase of foreclosed property, there are many legal questions that should be asked especially with the new Arizona foreclosure laws. As with any transaction of this magnitude, it is always best to work only through qualified real estate agents as well as with estate attorneys or other legal expert who can navigate the muddy waters of this complex legal mandate.
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