In Arizona, many homeowners who lose their home to foreclosure are not required to pay their lender for any deficiency between what they owed on the home and the price that the home is sold for at a trustee's sale. This protection from liability is found in Arizona's "anti-deficiency" laws.
However, Arizona's anti-deficiency statutes do not protect all property owners from liability for a deficiency in the event of a foreclosure. In these instances, in order to determine the correct amount of the deficiency, the fair market value of the property must first be established. In MidFirst Bank v. Chase, 1 CA-CV 11-0013, the Arizona Court of Appeals found that a bank's bid price for a property sold in a Trustee Sale is not evidence of the property's fair market value for purposes of calculating a deficiency judgment.
In MidFirst Bank v. Chase, the lender, MidFirst Bank ("MidFirst") loaned $1,620,000 to a borrower. The loan was secured by a deed of trust recorded against real property, and was guaranteed by two individuals, Mike and Linda Chase (the "Chases"). The Chases defaulted and MidFirst purchased the property at the trustee's sale for a credit bid of $486,000.
MidFirst then moved for summary judgment against the Chases seeking a deficiency judgment of $1,325,044.09. The Chases argued that there was no deficiency because the "value of the Property far exceeds anything that could be owed on the Loan." The trial court granted MidFirst's motion for summary judgment. The trial court reasoned that, "No reasonable juror could find for [the Chases] on the issue of fair market value based upon the record presented." The Chases appealed and the Court of Appeals reversed the trial court's decision.
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