How Do the Recent Changes in the Real Estate Loan Anti-Deficiency Laws Apply to You?

On January 1, 2015, Arizona’s amended anti-deficiency laws became effective. The previous law contained in Arizona Revised Statute §33-814 (G) held that “If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses”. Basically, this breaks down to be, as long as a loan is secured by property of 2.5 acres or less, and used for a one or two family residence, the owner is not responsible for the difference if the fair market value of the property is less than the outstanding balance of the loan when the house is foreclosed and sold at auction.  

The changes to the law, which took place January 1, 2015, apply to all loans, secured by deed of trust, after December 31, 2014. So if a loan occurred before that, the amended law is not applicable. The amended law is now contained in Arizona Revised Statute §33-814 (H) which states that the amended law applies if any of the following are true; “(1) Trust property owned by a person who is engaged in the business of constructing and selling dwellings that was acquired by the person in the course of that business and that is subject to a deed of trust given to secure payment of a loan for construction of a dwelling on the property for sale to another person. (2) Trust property that contains a dwelling that was never substantially completed. (3) Trust property that contains a dwelling that is intended to be utilized as a dwelling but that is never actually utilized as a dwelling.”


Imagine a home mortgage loan where the mortgage company pays you and your re-payment obligation is deferred until you sell or for the rest of your life. To those of us accustomed to monthly mortgage payments this sounds amazingly good. This is the Reverse Mortgage. It is a powerful and increasingly popular estate planning and financial planning tool. If you are over age 62 and have paid off or mostly paid off your home, you might qualify for a Reverse Mortgage. There are several advantages. In addition to the deferral of your payment obligation, the loan proceeds are not taxable income, there is no deficiency liability if the value of your house becomes less than the loan balance and your family can still (possibly) inherit your home.

Do I Need A Real Estate Agent To Buy Or Sell Real Estate?

Real estate agents are paid by commission. If you are selling your home, chances are this will factor into the listing price. If you are buying a home, chances are this cost will be, at least partially, passed on to you. In today’s market and economy, every penny counts, so, is it really necessary to hire a real estate agent to buy or sell your home?

To begin with, it is not required in the state of Arizona to have a real estate agent assist you with buying or selling your home. However, there are some practical reasons having an agent may be helpful. Those will be discussed further below. Additionally, agents can help with some semi legal work such as preparing the contract and other necessary documents. Finally, agents often have good connections to title companies, loan officers and home inspectors that can make the process less stressful.

Buying or selling your house is an exciting process, but can also be complex and stressful for some. Many people find the benefit of having a knowledgeable agent eases that burden and keeps the process running more smoothly. Often times transactions will also happen rather quickly and can be paper intensive, having an experienced agent can also lessen the stress you might miss or forget part of the process. As stated above agents also have good connections with vendors, and they are generally keen as to similar properties in the area and what comparable properties might sell for. One of the best reason to hire an agent if you are buying is that they can do all the leg work of finding a property you like for you. Many people are simply to busy to drive around town looking for houses they like. However it is much simpler to provide your requirements to an agent and let them do the work for you. Agents have access to lists of real estate for sale that are not accessible to those without a license. This greatly simplifies the process.

Dealing With Your Homeowner’s Association

With the growth of common interest developments, such as large developments of single family homes, homeowners associations are becoming more and more prevalent by the day. Homeowners associations are typically mandatory when a buyer purchases a lot, or ownership interest, in a development. Although most homeowners associations are incorporated, and thus governed by the State, oversight is often minimal. Homeowners associations are generally incorporated by the developer prior to the sale of the land, at which time the Codes, Covenants & Restrictions, are recorded. The restrictive covenants “run with the land” and thus, if one member sells a home he is no longer part of the association and the new owner takes his place, and is subject to the restrictions that attach as well.

All homeowners in a given development have to follow the restrictions set forth in the CC&R’s. Generally, these powers relate to the homeowners association’s goals of “protection, preservation or proper operation of the property and the purposes of the association as set forth in its governing instruments” (Laguna Royale Owners Assn. v. Darger, 119 Cal.App.3d 670). Homeowners associations have many methods to enforce these restrictions including the threat, or actual levying of fines, liens and legal action against an individual homeowner. Given the broad powers of a homeowners association to enforce its goals, an individual homeowner can be faced with a daunting task of defending themselves if the association deems them to have run afoul of the CC&Rs. However, just because a homeowners association claims a homeowner is in violation, doesn’t make it true.

If a homeowners association is trying to enforce restrictive covenants against you as a homeowner, it is important to know what they can do, and perhaps more importantly, what they can’t. To begin with, most homeowners associations have general review or architectural design committees charged with the task of making sure homeowners requests are in line with the restrictive covenants set forth by the homeowners association. Homeowners associations must follow the guidelines they have set forth in order to enforce a restrictive covenant. Even then, when an association seeks to enforce a restriction, it must still do so in good faith and not act in a manner that is arbitrary or capricious. Finally, the enforcement procedures must be fair and applied uniformly to all homeowners. This basically boils down to the homeowners association acting in a reasonable manner. But how will a court decide what reasonable means?