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Arizona Real Estate Law
by Christopher A. Combs
The following is for informational purposes
only and is not intended as definitive legal or tax advice. You
should not act upon this information without seeking independent
legal counsel. If you desire legal, tax or other professional advice,
please contact your attorney, tax advisor or other professional
consultant.
Costs Unrecoverable on Seller Carryback Foreclosure
Question: When I sold my Tempe home five years ago, I furnished financing to the buyers with a "seller carryback," i.e., the buyers agreed to pay me $80,000 in payments of $750 per month, plus interest, over ten years. The buyers are now going through a divorce and have stopped making the monthly payments to me. The title company has scheduled a foreclosure sale at the title company's office. Will this foreclosure sale be a silent auction or will potential buyers bid against each other? Who will own this Tempe home if no potential buyers attend the foreclosure sale? I know that if someone buys my Tempe home at the foreclosure sale, this new buyer will have to pay my costs such as recording fees and title company fees, but who pays those costs if no one buys the Tempe home?
Answer: First, the foreclosure sale at the title company's office is a public auction. In other words, the title company officer holding the foreclosure sale will accept bids from prospective buyers until the highest purchase price is reached. Second, inasmuch as the vast majority of foreclosure sales have no prospective buyers in attendance, you should expect to, again, become the owner of the Tempe home. Third, if no one buys the Tempe home and you become the owner at the foreclosure sale, you will not receive reimbursement for any of your costs, although you will have the benefit of an increased tax basis in the Tempe home for the amount of your costs. If you do become the owner of the Tempe home again, you will have to bring current the property taxes and any mortgage payments on mortgage loans which have priority over your $80,000 seller carry-back. You are entitled, however, to immediate possession of the Tempe home after the foreclosure sale in order to rent or sell the Tempe home.
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