Recently, there has been a discussion in the forums where a poster in Arizona has sought suggestions from the community members regarding deficiency from foreclosure and taxes to be paid on it. Given below is the situation described by him in the forum:

The value of the poster’s current home in Arizona is low and if he sells it, there will be a deficiency of around $50k on the first mortgage. The poster says the home cannot be rented due to the present market condition. He wants to buy a new home in New Jersey and let this home be foreclosed. He has a credit score of 700+ and makes enough to afford one mortgage. He asks:

1. Can the lender sue him for deficiency in Arizona?
2. Can the lender come after his home in NJ for the deficiency in AZ?
3. Will he owe taxes on the deficiency?

Deficiency judgment in Arizona

If the poster cannot rent or short sell the AZ home in this market and lets it go into foreclosure, he will be responsible for the deficiency. Lenders in Arizona do have the right to pursue deficiency judgment against borrowers, provided the property is not less than 2.5 acres and it is not used as either a single 1-family or single 2-family primary residence. However, lenders will have to get the deficiency judgment within 90 days after the trustee’s sale.
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