Help! I NEED SOME GUIDANCE

I have been practicing real estate law for twelve years. In doing so, I have been fortunate enough to represent many of the largest real estate companies in the State of Arizona and have been on the ground floor of every market turn, swing, move, you name it, during that time. As such, I can state with all honesty that this current market, with the challenge that most of us face in that we owe more money on our homes than they are worth, is the most legally difficult market to navigate that I have witnessed.

What do I mean by that? Well, Arizona is one of roughly a dozen states that provides protections for borrowers of money used to purchase a home. This is known as Arizona's Anti-Deficiency protections and simply put, mandates that a bank's sole recourse for default on a purchase money loan is to force the sale of the collateral - the house.

Now, the intricacies from there can be somewhat complex. First, what is a purchase money loan? Well, it is what it sounds like, the loan used to purchase the home. Second, does this protection extend to all types of property? No, it only extends to single or double family residences, on two and half acres or less of land, that have a completed structure on it and that has been utilized as a dwelling. Third, what if the home owner has multiple loans, including a second line of credit? Well, that is where it can get complex, but, simply put, pure lines of credit, that were not used to purchase a home, will not have protections. In other words, if that type of loan is not repaid, the bank could pursue the borrower for the debt.

From there, other questions abound, such as how are refinanced loans treated, how are loans used to improve the property treated, etc. etc. The bottom line is that every home owner's personal situation is unique and will need to be explored. That is why working with qualified professionals is so important. It is also why examining these issues early on is vital.

Ideally, most homeowners will be candidates for short sales or, if not, know the ramifications of allowing a property to go through a Foreclosure or Trustee Sale process. Further, ideally, any issues with the lenders (e.g., a line of credit lender) can be addressed during a short sale negotiation. To explain, often times debts owed, that are not protected under the deficiency laws, can be negotiated and reduced during the short sale process.

The great news is that there are protections. That is of utmost importance! The challenges are knowing when and where those protections apply and knowing how to take advantage of those protections.

Be on the look out for additional postings as we takle challenge by challenge.