Deficiency Judgment – Glossary | RJP Estate Planning

Property & Real Estate

A court order for a borrower to pay the remaining loan balance after a foreclosure sale, limited by Arizona's anti-deficiency protections for residential property.

A deficiency judgment is a court order holding a borrower personally liable for a remaining loan balance after foreclosure. Sometimes a lender sells the property for less than the debt owed. The shortfall is called the "deficiency." The lender may then ask a court to make the borrower pay it.

Arizona's Anti-Deficiency Protection

Arizona law provides significant protection for residential homeowners. Under A.R.S. § 33-814(G), certain properties are protected. The property must be two and a half acres or less. It must serve as a single one-family or two-family dwelling. For these properties, the lender cannot pursue a deficiency judgment after a trustee sale. The sale price is treated as full satisfaction of the debt.

When the Protection Does Not Apply

The anti-deficiency rule does not cover commercial property, vacant land, or large investment properties. Properties over two and a half acres are not protected. Residential construction loans where the home was never finished or occupied also fall outside the rule. For these properties, the lender has ninety days after the trustee sale to file under A.R.S. § 33-814(A).