The following is a synopsis of the various ways to purchase/sell real estate in Arizona, the procedure to foreclosure for each method and the approximate time it will take to foreclose. Some (legally required) steps have been omitted, but this will give you a pretty good picture of each:
1. Lease with Option to purchase. The tenant is a tenant, not a buyer. Even when they exercise the option, they must still meet their obligations as a tenant (i.e., paying rent), otherwise the tenant may be evicted. The first step of the eviction is a notice: 5-Day Notice for nonpayment of rent or for health & safety violation; 10-Day Notice for any other material noncompliance. If the tenant does not cure the default by the end of the notice period, the landlord may file a special detainer action the very next day. The initial appearance on the eviction normally occurs within seven days of filing the papers with the court. On the initial appearance date: (1) if the tenant fails to appear, the landlord will normally receive a judgment by default, (2) if the tenant appears, the judge will ask if they plead guilty or not guilty, and if they plead guilty, judgment will be entered against them that day, or (3) if the tenant pleads not guilty, then the judge will either set the trial for later that same day or another day, normally within the next five days. On that day, the case will go to trial and the landlord, if successful, will receive a judgment against the tenant. Five days after the judgment (however it is obtained, see 1-3 above) and if the tenant has not vacated the premises, then the landlord may apply for and receive a Writ of Restitution. After paying the filing fee to the court and the service fee to the constable, the Writ of Restitution will be served upon the tenant (normally) within a couple days by the constable. If the tenants are not out when the constable executes the Writ, the constable will escort the tenants to the curb and the landlord will be given possession of the premises. The landlord must be prepared to have the locks changed at that time. The foregoing process normally takes about 3 to 4 weeks, depending on the type of notice (i.e., 5 or 10-Day) that has to be served.
2. Agreement for Sale
(which will also apply to a lease/purchase, wherein the tenant acquires an "equitable interest" in the property as soon as the tenant/buyer makes any type of payment, where part of that payment goes toward the payment of the property). In an Agreement for Sale, also known as a "contract for deed," "land contract" or "contract to convey," the buyer puts some amount of money down and the seller agrees to accept payments on the balance due. When the buyer has paid all the money due, the seller then gives the buyer a deed to the property. If the buyer commits a non-monetary default (i.e., failure to maintain, failure to insure, etc.), then the seller must foreclose the Agreement for Sale as a mortgage, and must follow the mortgage foreclosure procedure in A.R.S. Sections 33-721, et. seq. (See Section 4, below). If the buyer under an agreement for sale commits a monetary default, then the seller must follow the "forfeiture" procedure sent forth in A.R.S. Sections 33-741, et. seq., which sets forth various waiting periods: (1) If the buyer has paid less than 20% of the purchase price, the seller must wait 30 days before starting the forfeiture process, (2) If the buyer has paid 20% - 30% of the purchase price, the seller must wait 60 days, (3) If the buyer has paid 30% - 50% of the purchase price, the seller must wait 120 days, and (4) If the seller has paid more than 50% of the purchase price, the seller must wait 9 months. After the "waiting period," the seller must prepare a Notice of Election to Forfeit. This Notice must be sent by certified mail to the buyer and recorded in the county where the property is located. Twenty days later, if the buyer has not brought payments current, the seller may prepare, serve and record a Notice of Completion of Forfeiture. The seller now has legal title to the property, but if the tenant has not vacated, the seller must serve a 5-Day Demand for Possession on the occupant(s) and then, if they do not vacate, proceed with the eviction procedure (see Section 1, above). This procedure will normally not take less than 2 months (minimum 30 day waiting period plus time for eviction).
3. Deed of Trust.
When a buyer purchases in this manner, the buyer signs a promissory note and a deed of trust. The buyer immediately receives a deed to the property from the seller, but a trustee holds the deed of trust. If payments are not made by the buyer, the lender/beneficiary instructs the trustee to commence a non-judicial foreclosure, called a "Trustee's Sale." A Trustee's Sale is commenced by recording a Notice of Trustee's sale. Ninety days (or more, but not less) after recording the Notice of Trustee's sale, the trustee may auction the property at a Trustee's Sale. If no one bids, the lender/beneficiary enters a credit bid for the amount owed to the lender, the auction is closed and the lender becomes the legal owner of the property. If someone bids more than the lender's credit bid at the auction, that person becomes the new owner. The new owner receives a Trustee's Deed. If there are still occupants in the property, the new owner (the lender or the highest bidder) must serve the occupants with a 5-Day Demand for Possession and then follow the eviction process (see Section 1, above). If the lender wishes, a Deed of Trust may be foreclosed as a mortgage (see Section 4, below). This procedure will normally not take less than 4 months (90 day period after recording Notice of Trustee's sale plus time for eviction).
4. Mortgage.
When a buyer purchases in this manner, the buyer signs a promissory note and a mortgage. The buyer immediately receives a deed to the property from the seller. The lender holds the mortgage. If payments are not made by the buyer, the lender may commence a judicial foreclosure, which is merely a regular civil lawsuit filed in the superior court where the property is located. The lender files a Complaint in court. The lender must then serve the buyer with a Summons and the Complaint. The buyer has 20 to 30 days to file an Answer to the Complaint (depending on where the buyer resides). If the buyer does not file an Answer, the lender may file an Application for Default. The buyer then has another ten business days to file an Answer to the Complaint. If the buyer does not file an Answer, the court will normally give the lender a default judgment. If the buyer files an Answer, then the parties are given time for "discovery" and other litigation matters. It will normally take 4 to 12 months before the matter goes to trial. In the judicial foreclosure, the lender will also ask that the property be sold at auction. The court will issue an Order giving the sheriff of the county where the property is located, the authority to seize and sell the property. The property is sold at the Sheriff's Sale much in the same way as a Trustee's Sale, except that the buyer receives a Sheriff's Deed, rather than a Trustee's Deed. After a foreclosure, however, the buyer has a six month redemption period (30 days if the property is abandoned), wherein the buyer has the absolute right to pay all the amounts paid by the successful bidder at the Sheriff's Sale and receive title to the property. Some lenders will wait the six month period before seeking possession, but other lenders may not wait. If anyone occupies the property, the new owner (either the lender via a credit bid or the highest bidder) must serve the occupants with a 5-Day Demand for Possession and then follow the eviction process (see Section 1, above). A mortgage CANNOT be foreclosed non-judicially as deed of trust. If judgment is obtained by default, this procedure may only take a couple months, but if the buyer files an Answer to the Complaint, the process generally cannot take less than 4 months (time to file the Complaint, buyer to Answer, case set to trial and time for eviction).
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