Arizona anti-Deficiency Law: Since 1971 Arizona law has normally protected the borrower who defaults on a home loan.

A lender could foreclose, but could not sue the borrower if the loan was on property 2 1/2 acres or less, utilized and occupied as a one or two family dwelling (Arizona Revised Statutes 33-814)

Anti-deficiency for most Arizona residential property.


In a rare situation the lender may choose a judicial foreclosure (Arizona Revised Statutes 33-927) rather than the typical trustee’s sale.  If so, there is an additional requirement that the borrowed funds were used to purchase the house.

Note: in Arizona most residential lenders elect to use a non-judicial process referred to as a trustee’s sale.Bottom line – warn your investor friends about this important change in Arizona law.

The protection they have long enjoyed is gone for deeds signed after 2014.

What is the change (HB 2018): after December 31, 2014 all deeds of trust will not have the same protection if :

1) the borrower is engaged in the business of selling dwellings to the third party;

2) the property contains a dwelling that was never substantially completed, or

3) the property contains a dwelling that is never actually utilized as a dwelling.

Whether or not you agree with this change investors of Arizona and Texas property need to be warned – the protection they have long enjoyed is gone for deeds signed after 2014.  I am also concerned for homeowners who borrow money to buy or remodel a home and a lender forecloses before it is becomes a “dwelling”  under the new law.   I see the option for the lender to refuse to issue additional draws in order to complete a home.  That home is not designated substantially completed and therefore the lender can sue the homeowner.  This is not going to affect the typical first time home buyer because they can rarely afford to build a custom home, but it will affect more affluent borrowers.

Of course, the law changes over time.  Make sure to talk to an experienced real estate/foreclosure attorney if you have any questions.

Link to Arizona Anti-Deficiency Flow Chart (2037 downloads)



This bill did not follow the normal legislative process because it was a “striker”.   For those of you familiar with how bills become law you know how dangerous strikers are.  For the rest of you – here is an article about this process and its insidious nature.

We have several videos on this site.  This is one “Should I keep my home or let it go into foreclosure?”


Published On: May 19th, 2014By Categories: Consumer Issues, Deficiency, Real Estate, Trustee SalesComments Off on Arizona Real Estate Investors Lose Anti-Deficiency Protection at end of 2014Tags: , , ,

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Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys. *Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*