Tag Archive: foreclosure


In a staggering amount of cases that come across my desk, the bank issues a Notice of Trustee’s Sale that tells the homeowner the exact date and time their house is to be sold at auction – only to then postpone the sale.  Whether the reason for the postponement is a bankruptcy that was filed, a loan modification that is furiously trying to be worked out, or a short sale offer that peaked the bank’s interest, the result is inevitably the same:  Confusion, stress and worry on the part of the homeowner plagued with the most pressing questions of them all “When do I have to be out of my house?”

Of course, the best – least stressing solution – for the homeowner and his or her family is usually to find a new home well before the sale date that was originally scheduled.  Then you don’t have to worry about what happens if the sale doesn’t take place, and how long do I have to get out.  In reality, this doesn’t always work out that way, and in some cases, where the bank just simply is dragging its feet, it is almost better for the homeowner to stay in their home – rent free – while they can, and save up the often much needed funds for the move.

The unfortunate fact is, once the Notice of Trustee’s Sale has been posted, and assuming it wasn’t cancelled (and typically the banks do NOT cancel their notice of sale in a scenario as this one), the bank does NOT have to give you any additional notice of the sale.  This is true even if the original sale date has passed and the homeowner is in a kind of limbo.  The bank has the right to foreclose on your house – read: sell it at auction – pretty much whenever they please, after the original notice period has passed.

The implications of this are plentiful.  The first, and most important one is to remember that the ‘foreclosure department’ of your bank probably doesn’t even know the ‘short sale/loan modification department’ exists, nevermind ever communicates with them.  The result of this red tape nightmare is, of course:  You may me plugging along and looking hopeful for your loan modification to go through, and next thing you know you get served with an eviction notice because your house was sold to an investor last week. 

In a bankruptcy scenario, once the automatic stay has been lifted, and assuming the bank has issued their Notice of Trustee’s Sale prior to filing, the bank can move forward with their sale at their leisure.  The most frustrating part for me, as a bankruptcy attorney, is that there is no way for me to give my clients peace of mind by giving them any kind of definite answer with respect to the sale date.  All I can do is to advise them to keep calling the bank’s attorneys to find out what date the sale has been set for. 

It is hard, when there are no guarantees and no definite answers, but the best thing you as a homeowner can do is to keep on top of all of the information.  Don’t rely on what your realtor tells you (and I say this with the greatest deference to the realtors out there – the ones I work with are wonderful professionals who know what they are doing, but the bottom line remains – they do not control the bank’s foreclosure department), don’t even rely on what the bank is telling you, unless it is the bank’s foreclosure department, and certainly don’t believe what your neighbor/coworker/acquaintance/hairdresser tells you.  Every case is unique and what happened in your neighbors case will most likely not happen the same way in yours.  Probably not even remotely close to it.

The word ‘short sale’ has become a bit of a buzz-word in the last year or two.   Everyone seems to be talking about it, doing it, or at the very least knowing someone who is going through a short sale.  But, in all of that talk, not everyone understands what a short sale really is (it is NOT a way to save your home, for example), how it works, and how it can affect you.

A short sale is a vehicle that allows you to sell your home in a market where your home is worth less than what you owe on it.  By it’s very definition, a short sale is the sale of real property for less than what you owe on it.  Because the bank(s) holding the mortgage(s) does not get all that they are owed, it has to approve the short sale before it can be finalized. 

A short sale can be the way to go for you, if your home loan is your only source of concern.  It will allow you to get out from under the big mortgage without having to worry about the potential consequences of a foreclosure. 

Most of the legwork in a short sale is done by you, the homeowner, and your realtor. A good realtor is probably the best asset to have in your short sale, and if you are looking for one, Marco | Wimmer PLLC can provide you with several names and numbers of some experienced realtors that may be right for you. 

The realtor will work with you in listing the property and completing the bank’s requirements for a short sale.  Remember, the short sale is a contract between you and the bank, and as such you want to make sure that the contract works for you.  The key component of the contract is whether the bank will consider your debt fully satisfied.  If not, they may try to come after you for the difference between the sales price and the amount owed at a later time.  Based on your individual situation, you may have more leverage in the negotiations than you think.  Finally, keep in mind that in a short sale, the bank typically forgives you a portion of the debt, so they will issue you a 1099(c) for the debt forgiven.  Be sure to talk to an accountant about how that can affect you. 

In conclusion, if your home is the only source of concern for you, and for whatever reason you wish to sell it without waiting for its value to increase, a short sale may be the way to go.  On the other hand, if you are struggling with other bills and cannot make ends meet even without taking into account your mortgage payment, bankruptcy may be the better approach.  Homeownership may affect your eligibility to qualify for one chapter over another, so be sure to talk to an attorney before starting on the path of a short sale.

If you live in Arizona, and you have done any kind of research about what happens if you just ‘let your house go to foreclosure’ you have probably come across the Arizona Anti-Deficiency Statutes (ADS), and you have probably walked away confused.   The Arizona legislature, back in the late 70s/early 80s enacted a couple of laws that protect consumers – people like you and me.  Unfortunately, as is the case with most laws, it is a bit complicated to understand, and depends heavily on facts.  Here is a quick overview of how it works:

Question:  Can the Bank come after me for the difference between the mortgage balance and the amount the house was sold for at auction?

Answer:

  1. If your house is a single or dual family residence; and
  2. it is on 2.5 acres or less; and
  3. you, or someone, has actually lived in the residence; then…

…the bank that holds the Trustee’s Sale (usually the first mortgage) CANNOT come after you.  (Be sure to re-read the previous blog post entitled “Foreclosure in Arizona – The Basics” to find out why I did not simply say “the bank that is foreclosing” here).   They will likely issue you a 1099(C) (which is a tax form), and there may be some tax-consequences, but they CANNOT bring a law suit against you for the difference.  In some cases, you may be able to avoid tax-consequences as well, but as I am not a tax attorney, nor an accountant, the best I can do on that is refer you to an accountant on how that works.

Pretty nice, right?  Now, the next question has to be “What about the second mortgage?”  A different statute applies to the bank that is not holding the Trustee’s Sale, and here is how it works:

  1. If your house is a single or dual family residence; and
  2. it is on 2.5 acres or less; and
  3. you, or someon0ne, has actually lived in the residence; and
  4. 100% of the debt owed to the bank was used to purchase the property, then…

…even the second mortgage CANNOT come after you for any monies owed, but the same tax rules still apply. 

The main problem I see in my practice, and the reason why short sales are often the better way to go when bankruptcy is not an option, is that the second mortgage was NOT in fact used to purchase the house.  Unfortunately, and in the bluntest terms possible (I hope you will forgive my bluntness), if you pulled any cash out of your house, chances are the ADS will not protect you.

Now, if ADS does not protect you, and your situation is such that a short sale alone will not solve your financial troubles, bankruptcy may be the answer.  If you surrender your house in the bankruptcy, then the discharge will include the difference between the sales price and what you still owe, AND as an added plus, having the debt discharged in bankruptcy is one of the exceptions to the general rule of taxation.

This is about it, in a nutshell.  Sounds pretty easy, right?  Well, chances are, your particular situation is a little more complicated, and in the spirit of ‘knowledge is power’ please do not hesitate to call or email us to talk specifics.  You can find all of our contact information on www.marcowimmerlaw.com.