Section 9: Deeds, Mortgages, and Taxes Flashcards
Deeds, Mortgage, and Taxes:
Financing Real Estate:
* There are many types of financing from both public sources and private sources.
* Most common types of financing are mortgages and ________ but seller financing/land contracts are still very popular.
Deeds of Trust
Deeds, Mortgage, and Taxes:
Financing Real Estate:
* When discussing Financing property, we need to understand what each ________ does and when it would be used.
Instrument
Deeds, Mortgage, and Taxes:
Financing Real Estate:
IMPORTANT : Arizona is a ‘deed of trust’ state and so ________ are preferred by institutional lenders over mortgages for loans secured by a buyer’s home.
Trust Deeds
Deeds, Mortgage, and Taxes:
Instruments:
* When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property:
1. The ________
2. The Financing Instrument (Mortgage, Deed of Trust, Land Contract (aka –Seller Financing, Owner Financing/Carry, Vendor/Vendee))
Note / Promissory Note
Deeds, Mortgage, and Taxes:
Instruments:
* When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property:
1. The Note (Promissory Note)
2. The ________ (Mortgage, Deed of Trust, Land Contract (aka –Seller Financing, Owner Financing/Carry, Vendor/Vendee))
Financing Instrument
Deeds, Mortgage, and Taxes:
Promissory Note:
- ________ Amount
- ________ Rate
- Loan ________Term
- Default ________
- ________ Of Payment
- ________
Loan
Interest
Triggers
Method
Signature
Deeds, Mortgage, and Taxes:
Promissory Note:
What is required on the Promissory Note?
1.
2.
3.
4.
5.
6.
- Loan Amount
- Interest Rate
- Loan Term
- Default Triggers
- Method Of Payment
- Signature
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
* The Note or Promissory Note gives evidence of a ________.
Debt
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
IMPORTANT: A Promissory Note is a ________ signed by a Borrower.
Financing Instrument
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
* Primary document that evidences the borrower’s legally enforceable promise to repay and it is typically ________ along with the deed.
Recorded
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
*The ________ is the primary document that evidences the borrower’s legally enforceable promise to repay the loan (IOU).
Promissory Note
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
* Can be used as evidence of a ________ on both personal and real property.
Lien
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
* A Promissory Note is a financing instrument signed by a borrower.
* Contains the payment terms and ________:
o Loan amount
o Interest rate
o Loan term
o Default trigger
o Method of payment etc.
Conditions
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
The Note:
IMPORTANT:
Promissory Note:
The primary loan document that proves a promise to ________ the debt.
Repay
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
* The financing ‘instrument’ is document that provides the ________ for the note.
Security
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
o Used for borrowers who NEED to ________ money for a home or other type of real estate purchase.
Mortgage
Trust Deed
Land Contract (aka –Seller Financing, Owner Financing/Carry, Vendor/Vendee).
Borrow
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
IMPORTANT: The financing instrument is recorded with the ________ where the property is located to give evidence to the public that a financing instrument exists.
County
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
* A borrower in need of financing would hypothecate their ________ to the lender.
Collateral
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
* Hypothecation:
The ________ of property as security for an obligation or a loan without losing possession of it (You stay in the house you hypothecated to the lender).
Pledging
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
* The BORROWER will offer to the lender the property as collateral to ________ the loan and will secure it or ‘hypothecate it’ with a mortgage or deed of trust.
Obtain
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
* The Borrower gets to stay in the property and use/enjoy it while the lender uses that property as collateral against the loan.
*It is the mortgage, deed of trust or land contract document that provides the rights to a lender to ________ if you fail to make the monthly payments.
Foreclosure
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
*By hypothecating to the lender the rights to the property, the borrower is giving ________ or the rights to sell in case of default to the lender.
Legal Title
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
When the borrower gives up or hypothecates their property to the lender, they are allowing the lender to show ________ to the property being financed. The lender needs to show proof that in case the borrower doesn’t repay the loan, the lender can foreclose or take back the property, so the lender has legal title.
Legal Rights
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
________: “the rights to dispose of the property”.
Legal Title
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
Legal Title: “The rights to ________ of the property”
*This is the “D” in the DEEP-C, this is the rights to DISPOSE, in cases of DEFAULT.
Dispose
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
When the borrower gives the LEGAL TITLE to the lender or trustee, the borrower has ________, or the rights to enjoy the property while another party has the legal title to it. In this case, it’s known that the borrower has ‘equity’ in the property, and they won’t have full legal title until the property is paid back in full, at which time the lender/trustee will give back the legal title (once the promise to repay was satisfied).
Equitable Title
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Hypothecation:
________: “the rights to enjoy the property when the lender has legal title”.
Equitable Title
Deeds, Mortgage, and Taxes:
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property this is one of these two:
Financing Instruments:
Mortgage:
Mortgage is Latin for “________”
Death Pledge
[Mort = Death]
[Gage = Pledge]
Deeds, Mortgage, and Taxes:
Mortgages:
* Mortgages are used frequently in many states as a form of financing.
IMPORTANT: Mortgages are available in AZ but they are not commonly used.
REMEMBER: Mortgage has ________ Parties:
Death Pledge is 2 words SO there are 2 parties.
Two
Deeds, Mortgage, and Taxes:
Mortgages:
* When a mortgage is used as the “financing document” there are two parties:
*________= BorrowOR (Giv-or of the Monthly Payments).
*________= Lender (Receiv-EE of the Monthly payments).
MortgagOR
MortgagEE
Deeds, Mortgage, and Taxes:
Mortgages:
* The mortgage is a document that you give to the lender that creates a lien on the property. It is given as security for the debt borrowed.
IMPORTANT: It hypothecates the property and gives the rights to sell to the mortgagee in case of ________.
Default
Deeds, Mortgage, and Taxes:
Mortgages:
Understanding Equitable Title in a Mortgage:
Remember, ________ in real estate refers to the INTEREST or RIGHTS a party has in a property, even though they may not have legal title to it. This means that while they don’t hold the LEGAL title (the bank does), they still have certain rights and benefits associated with the property.
Equitable Title
Deeds, Mortgage, and Taxes:
Mortgages:
Understanding Equitable Title in a Mortgage:
In the context of a mortgage, equitable title typically refers to the interest the borrower (or mortgagor) has in the property. When a person takes out a mortgage to buy a property, the legal title to the property is held by the ________ as security for the loan until the debt is fully paid off.
Lender / Mortgagee
Deeds, Mortgage, and Taxes:
Mortgages:
Understanding Equitable Title in a Mortgage:
However, the borrower retains EQUITABLE title to the property, which grants them the right to use, possess, and benefit from the property as long as they meet their mortgage obligations. Once the mortgage is ________, the borrower will typically receive the legal title to the property, and their equitable title will be MERGED with the LEGAL title, giving them FULL ________.
Paid Off
Ownership Rights
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
* This is a ‘financing instrument’ and it is recorded with the county where the property is:
* ARIZONA is a Trust Deed or Deed of Trust State.
* The Deed of Trust is the document that creates a lien on Arizona real property to secure payment of a debt or satisfaction of an ________.
Obligation
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
* ________ is used frequently to create a lien on real property to secure the obligations contained in the Note or Promissory Note.
Deed of Trust
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
o Certain Items need to be identified in a deed of trust and include:
A legal description of the property that will be used as security.
IMPORTANT: All parties involved in the process:
1.
2.
3.
Trustor
Trustee
Beneficiary
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
In a Deed of Trust there are three parties involved:
o ________=Borrower
“Giv-or of the bare legal title to the trustee”.
Trustor has equitable title (right to use and possess).
Trustor gives power of sale to Trustee if they fail to pay.
o ________=The person or entity that “benefits” from payments (Banks/Lenders).
o ________=Neutral Third Party.
“Receiv-ee who receives or holds legal title”.
Trustor
Beneficiary
Trustee
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
In Arizona, six entities can serve as trustees; Attorneys, ________, title or escrow companies, insurance agents, public fiduciaries, & real estate brokers.
Banking Institutions
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
________: “Borrower in a deed of trust who gives legal title to the trustee and payments to the beneficiary”.
- This person is the Giv-or of legal title to the trustee.
- This person has equitable title (right to enjoy).
- This person gives power of sale to Trustee if they fail to pay.
Trustor
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
________: “Neutral Third Party in a deed of trust who holds legal title”.
* “Receiv-ee who receives or holds legal title.
Trustee
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
* In Arizona, six entities can serve as trustees: Attorneys, banking institutions, title or escrow companies, insurance agents, ________, & real estate brokers.
Public Fiduciaries
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
* In Arizona, six entities can serve as trustees: Attorneys, banking institutions, title or escrow companies, insurance agents, public fiduciaries, & ________.
Real Estate Brokers
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
* In Arizona, six entities can serve as trustees: ________, banking institutions, title or escrow companies, insurance agents, public fiduciaries, & real estate brokers.
Attorneys
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
* In Arizona, six entities can serve as trustees: attorneys, banking institutions, ________, insurance agents, public fiduciaries, & real estate brokers.
Title or Escrow Companies
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
* In Arizona, six entities can serve as trustees: Attorneys, banking institutions, title or escrow companies, ________, public fiduciaries, & real estate brokers.
Insurance Agents
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
________: “The person or entity that benefits from payments (Banks/Lenders)”.
Beneficiary
Deeds, Mortgage, and Taxes:
Financing Instrument:
o ________ = the document that contains the PROMISE to repay the loan.
REMEMBER: I Owe U [IOU]
The Promissory Note
Deeds, Mortgage, and Taxes:
Deed of Trust as a Financing Instrument:
HINT: 3 Words - 3 Parties
Deed of Trust:
o ________:
The document that pledges or HYPOTHECATES the property as security for the loan.
Deed Of Trust
Deeds, Mortgage, and Taxes:
Mortgage:
Quiz:
Which of these statements are incorrect?
The Promissory Note is the primary document that evidences the borrower’s legally enforceable promise to repay the loan.
The mortgage is a document that you give to the lender that creates a lien on the property, given as security for the debt borrowed.
In a deed of trust, the three parties involved are; Trust-or, Beneficiary, Trustee
Mortgage is latin for ‘Life Pledge’
Mortgage is latin for ‘Life Pledge’
Deeds, Mortgage, and Taxes:
Mortgage:
Case Study:
Q: What two instruments does a borrower need to use as evidence that a loan was obtained for a property?
When financing a purchase, a borrower will have two written instruments that are used as evidence that a loan was used to obtain the property:
1. The Note (Promissory Note)
2. The Financing Instrument (Mortgage, Deed of Trust, Land Contract)
Deeds, Mortgage, and Taxes:
Mortgage:
Case Study:
Name three terms and conditions that are on a Promissory Note.
Promissory Note Contains the payment terms and conditions:
1. Loan amount
2. Interest rate
3. Loan term
4. Default trigger
5. Method of payment
REMEMBER: M.I.L.L.D. Sauce
Deeds, Mortgage, and Taxes:
Mortgage:
Case Study:
Does Arizona primarily use Mortgages or Deed of Trusts? What is the difference between the two?
It is a Deed of Trust primarily used by Arizona. A deed of Trust is a ‘financing instrument’ recorded with the county where the property is located. However, Mortgages are used frequently in many states as financing (Not in AZ). The mortgage is a document you give the lender that creates a lien on the property. It is given as security for the debt borrowed.
Deeds, Mortgage, and Taxes:
Mortgage:
Case Study:
Q: What parties are involved in the process of a Deed of Trust?
In a Deed of Trust, there are three parties involved
1. Trustor
2. Beneficiary
3. Trustee
Deeds, Mortgage, and Taxes:
Mortgage:
Quiz:
In the State of Arizona, the two written instruments that are commonly used as evidence of a loan are?
Promissory Note and Deed of Trust
Promissory Note and Deed in Lieu
The borrower or trustor would sign the promissory note and the Deed of Trust
Recorded Note and Deed for Sale
Promissory Note and Deed of Trust
Deeds, Mortgage, and Taxes:
Mortgage:
Quiz:
Amanda goes to the credit union in her home town in hopes of borrowing money that can be used to purchase a property. She is told that she can qualify for a 10% down mortgage and she agrees. Which of the following parties would be required to sign and date the mortgage?
Lender Only
Borrower Only
Lender and Borrower
Lender, Borrower and Witnesses
Borrower Only
Deeds, Mortgage, and Taxes:
Mortgage:
Quiz:
A borrower wishes to obtain a purchase money loan for their purchase of a home located in Arizona. The bank offers them a loan, as long as the borrower will allow the lender to create a lien on the house that was being used as collateral. In this case, the lender and the borrower are known as?
Beneficiary and Trustee
Trustee and Trustor
Beneficiary and Trustor
Trustor and Mortgagor
Beneficiary and Trustor
Deeds, Mortgage, and Taxes:
Mortgage:
Quiz:
Which of the following may not serve as a trustee in the State of Arizona?
Escrow Company
Insurance Agent
Real Estate Broker
Trustor
Trustor
Deeds, Mortgage, and Taxes:
Mortgage:
Quiz:
In Arizona, the trustor gave what to the Trustee?
Recognized Title
Legal Title
Clear Title
Marketable Title
Legal Title
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
REMEMBER: The -OR is the ________ and the -EE is the ________.
Giv-or
Receiv-ee
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
* ________, contract for deed, installment contracts & Land Contracts are all terms used to describe the same CONCEPT of SELLER FINANCING.
Agreement for Sale
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
* Agreement for sale, ________, installment contracts & Land Contracts are all terms used to describe the same CONCEPT of SELLER FINANCING.
Contract for Deed
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
* Agreement for Sale, contract for deed, ________ & Land Contracts are all terms used to describe the same CONCEPT of SELLER FINANCING.
Installment Contracts
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
* Agreement for Sale, contract for deed, installment contracts & ________ are all terms used to describe the same CONCEPT of SELLER FINANCING.
Land Contracts
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
*The ________ is acting as the bank or lender but they don’t surrender LEGAL title until the loan has been paid in full, but allow the borrower/buyer EQUITABLE title.
Seller
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
REMEMBER: There are only the two parties in this case, the Seller/________ and the Buyer/________.
Vendor
Vendee
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
o ________: “The seller who is financing the buyer and will eventually give up LEGAL title once paid in full”.
Vendor
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
o ________: “The buyer, who is being financed, and will receive LEGAL title once the vendor is paid back in full”.
Vendee
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
* The seller/VENDOR allows the vendee the use and possession of the property, They hold ________ until the loan is paid back in full at which point the LEGAL title or DEED is then given to the buyer/VENDEE.
Equitable Title
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
* Easy for the seller/VENDOR to repossess or foreclose or take back–based on TIMELINES.
* This is known as “________”. The buyer gives up their equity due to non-payment.
Vendee Forfeit
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
In Arizona, specifically, if a seller is offering this type of Vendor/Vendee financing, the vendor already has the legal title and the deed, so there isn’t a need to foreclosure if the buyer defaults on payments.
IMPORTANT: In this case, there is a ‘________’ which is based on how much EQUITY the vendee has in the property.
Forfeiture of Equity
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ less than 20% Equity: ________ Day Redemption Period
30 Day
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ 21% to 30% Equity: ________ Day Redemption Period
60 Day
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ 31% to 50% Equity: ________Day Redemption Period
120 Day
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ 51% or more Equity: ________ Day Redemption Period
270
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity.
If the Vendee fails to perform, the Vendor can file a notice in the county and serve notice to the Vendee by Process Server or ________.
Certified Mail
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ less than ________% Equity: 30 day redemption period
20%
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ _______% to ________% Equity: 60 day redemption period
21% to 30%
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ _______% to ________% Equity: 120 day redemption period
31% to 50%
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
*Forfeiture timelines in case of default is based upon the amount of equity:
▪Vendee @ ________% or more Equity: 270 day redemption period
51%
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
* If the Vendee fails to perform, the Vendor can file a notice in the county and serve notice to the Vendee by person or certified mail. The notice shall be delivered at least
________ Days prior to actual forfeiture of property and equity. The publication is to give notice to other creditors or the general public and needs to be recorded to be valid.
20 Days
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
* The Vendee (or anyone else) becomes current to the Vendor again, the seller or Vendor will need to file a ________, publicly acknowledging that the vendee is current again and will not forfeit their equity.
Notice of Reinstatement
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Foreclosure:
* The publication and recording of the “________” gives notice again to all parties that the vendor has taken back the property and all the equity with it.
Completion of Forfeiture
Deeds, Mortgage, and Taxes:
Seller Financing in Arizona:
Quiz:
A vendee in Arizona put 10% down and has made payments equal to an additional 25% equity. If the vendee defaults how much time would the vendor need to give to redeem the property?
30 days
120 days
240 days
270 days
120 days
REMEMBER: ADD THE DOWN PAYMENT + ADDED EQUITY FOR COMPLETE AMOUNT OF EQUITY.
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
* There are two types of States
* ________ Theory
* ________ Theory
Lien
Title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
________ Theory States:
*These states use Deeds of Trust (Like Arizona)
*Borrower gives LEGAL TITLE to a 3rd party, the trustee, who holds onto it until the debt is repaid.
Lien
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Lien Theory States:
IMPORTANT: The BANK or LENDER DOES NOT have the legal title which gives them the ________.
*Lender has a “Recorded Lien” against the property to prove their financial interest.
Rights to Sell
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
LIEN Theory States:
*Lender records their lien to show evidence that they are owed money.
o This is a “________” and is designed to show evidence of the lien. The borrower does not have clear title. Remember a this directly affects the marketability of the title.
Cloud on the Title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
LIEN Theory States:
o Lender of mortgaged property holds ________ rather than legal title.
o Borrower holds ________ and the deed.
Equitable Title
Legal Title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
LIEN Theory States:
*Arizona is a LIEN THEORY STATE.
*Arizona being a lien theory state means that Title will ________ at Close of Escrow (COE) and a deed of trust is recorded as EVIDENCE of the transfer. (NOT a Mortgage!!).
Transfer
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
LIEN Theory States:
* The borrower or trustor in Arizona is allowing the lender or Beneficiary to place a lien on the property–this is a voluntary & ________ lien.
Specific
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
LIEN Theory States:
o The TRUSTOR (borrower) is now referred to as the ________ (Receiv-EE of the Lien).
Lienee
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
LIEN Theory States:
o The BENEFICIARY (lender) is now referred to as the ________ (Giv-OR of the Lien).
Lienor
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
*Title Theory States use ________.
Mortgages
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
*IMPORTANT: Borrower has EQUITABLE TITLE
*This is the rights to enjoy the property.
- REMEMBER: DEEP-C
*These Rights ONLY include:
1.
2.
3.
4.
Enjoyment
Exclusion
Possession
Control
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
*IMPORTANT: Lender has LEGAL TITLE they have some of the Bundle of Rights - ________.
- REMEMBER: DEEP-C
Disposition
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
*IMPORTANT: Lender holds legal title to the mortgaged property until the mortgagor satisfies the terms and obligations of the loan.
*IMPORTANT: Lender gives the ________ to the borrower once all payments have been made.
**Helpful Hint: This is the same thing as driving a new car off the lot that was paid for using a loan from a bank. You Drive the Car, you Use the car and you Enjoy the Car. The Bank holds title (rights to repossess or sell) to the car until it is paid off then the title is released to you. You have equitable title until it is paid off. Distressed Properties
Legal Title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
IMPORTANT: Whoever has the “D” in the bundle of rights, the “DISPOSITION” - holds ________.
Legal Title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
If the lender holds the LEGAL title, it is a ________Theory State.
Title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
TITLE Theory States:
If the lender does NOT hold the title, they MUST have a LIEN to show evidence they are owed money - thus, they are in a ________ Theory State!
Lien
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Distressed Property Types:
* ________:
o A seller and a lender who agree to sell the property for less than the full amount owed is a short sale
Short Sale
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Distressed Property Types:
________:
o This is any listing where the owner/seller is the bank or lending institution.
Bank Owned Property / Real Estate Owned [R.E.O.]
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Distressed Property Types:
*________:
o A seller who is under this agreement, they have a time of REPRIEVE where the bank is allowing a set time for the borrower to NOT make payments while AVOIDING foreclosure.
Forbearance
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Distressed Property Types:
*________:
o The loan modification is where lender will allow the borrower the opportunity to adjust the terms, in an effort to keep them in the property.
Loan Modification
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
True or False:
Arizona is not a lien theory state.
True
False
True
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Case Study:
Regarding seller financing, when will the legal title be transferred to the buyer? What type of title will the seller give the buyer in the meantime?
The seller is acting as the bank or lender, but they don’t surrender legal title until the loan has been paid in full, but allow the borrower/buyer equitable title
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Case Study:
What does Vendee Forfeit refer to?
“Vendee Forfeit” means the buyer gives up their equity due to nonpayment. The vendor allows the vendee to use and possess the property until the loan is paid back in full, at which point the legal title or deed is given to the buyer/vendee. It is easy for the seller to repossess, foreclose, or take back – based on timelines.
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Case Study:
Is Arizona a Lien Theory or Title Theory state? What is the difference between a Lien Theory and a Title Theory state?
Arizona is a LIEN THEORY STATE. LIEN Theory States use DEEDS of TRUST while TITLE Theory States use MORTGAGES.
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Case Study:
What option may be available to a homeowner instead of a foreclosure? What are the benefits of this?
The homeowner can ‘give up’ rights and possession to the bank instead of foreclosure. This makes it possible to negotiate a deal in which the lender agrees not to pursue a deficiency judgment. Moreover, deeds given IN LIEU prevent FORECLOSURE and negatively impact credit.
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Quiz:
Arizona is typically referred to as a?
Deed of Trust State
Mortgage State
Beneficiary State
Community Deed State
Deed of Trust State
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Quiz:
In a state where Trust Deeds are used, who has the right to sell the property in case of foreclosure action taken?
Original Lender
Trustee
Beneficiary
Grantor
Trustee
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Quiz:
In which type of state does a borrower have equitable title?
Lien theory
Title theory
Community property
Service Theory
Title Theory
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Quiz:
At what point does the legal title transfer to the buyer in a Land Contract?
At time of sale
Once the loan is paid back in full
At the recordation of the contract
At the recordation of the Notice of Reinstatement
Once the loan is paid back in full
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Quiz:
If a Vendee has $144,000 in equity on a house that is valued at $190,000 where the seller is financing the buyer under a contract for deed, how many days does he/she have for redemption before the seller can foreclose?
270 Days
180 Days
120 Days
90 Days
They have 75% Equity in the property so they have 270 Days
Deeds, Mortgage, and Taxes:
Lien Theory and Title Theory States:
Quiz:
Central Bank has legal title to an owner’s property. The owner of the property borrowed money in the form of a mortgage. In this case, Legal Title stays with which party?
Lender
Trustee
Beneficiary
Owner
Lender
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
REMEMBER: In a Mortgage Foreclosure the ________ is the Borrower and ________ is the Lender.
Mortgagor
Mortgagee
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
* Requires the Mortgagee to go through “________” procedures which are usually more costly to the lender and take longer as the courts must now be involved.
Judicial Foreclosure
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
*IMPORTANT: Require a period of ________ which varies by States Statutes
*The courts act as NEUTRAL third party and determine if mortgagee can LEGALLY foreclose.
*There is still the REQUIRED time period however per each state.
Redemption
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
Redemption Period: “A timeframe where the Mortgagor who lost the property in the judicial sale can ________ the property by paying back all fees”.
Redeem
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
*Mortgages contains an ________ which gives lenders the rights to foreclose
o If however this clause were missing, it would be difficult to proceed with the foreclosure.
Acceleration Clause
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
o IMPORTANT: By denying the mortgagor the right to redeem the property after the foreclosure sale, then the lender could be deemed a ________ and have LIABILITY to the borrower.
Wrongdoer
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
________:
If upon defaulting on a mortgage, the lender can call the whole loan payable upon default and thus accelerates the forced sale.
Acceleration Clause
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
*________:
Timeframe where the Mortgagor who lost the property in the judicial sale can redeem the property by paying back all fees.
Redemption Period
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure:
*________:
If upon defaulting on a mortgage, the lender can call the whole loan payable upon default and thus accelerates the forced sale.
Acceleration Clause
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure In AZ:
*IMPORTANT: ________ Foreclosures also known as ________Foreclosures in Arizona are RARE as we are a deed of trust state but CAN exist if that was what the borrower and lender agreed upon.
Judicial
Mortgage
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure In AZ:
o A borrower who agreed to use a mortgage and is foreclosed on in Arizona, must have a ________ Month Period of Redemption per the Arizona Revised Statutes.
6 Month
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure In AZ:
Sheriffs Sale and Sheriff’s Certificate of Sale:
The deed granted by the courts in a Judicial foreclosure is a Sheriffs Deed, but before the borrower can obtain the deed, they MUST wait the redemption period. They will have a Sheriff’s Certificate to show “________” or, that they were the buyers at the mortgage sale.
Proof of Purchase
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure In AZ:
o ________:
The deed granted by the courts in a judicial foreclosure is a Sheriffs Deed. This deed offers little protection to the buyer and is an act of law.
Sheriffs Sale / Sheriff’s Certificate
Deeds, Mortgage, and Taxes:
Mortgage Foreclosure Process:
Mortgage Foreclosure In AZ:
o ________:
A deed that offers little protection to the buyer and is used to convey ownership as an act of law and is used in mortgage foreclosures.
Sheriff’s Deed
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
REMEMBER: Arizona is a Lien Theory state and we use the Trust Deed and as such, we use ________ who hold legal title–which allows them the “RIGHT to SELL” the property.
Trustees
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
o ________ holds the LEGAL title, while the ________ holds EQUITABLE title.
Trust-ee
Trust-or
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
IMPORTANT: Deed of Trust Foreclosure :
NON-JUDICIAL foreclosure process:
o Since the trustor gave their legal title to the trustee to hold for the Beneficiary voluntarily, ________ do NOT need to intervene on behalf of the borrower or lender.
Courts
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
IMPORTANT: Deed of Trust Foreclosure :
NON-JUDICIAL foreclosure process:
o Lender can foreclose the Deed of Trust and cause the property that is SECURED by the Deed of Trust to be sold via public auction at a ________. They have the Power.
Trustee Sale
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
IMPORTANT: Deed of Trust Foreclosure :
NON-JUDICIAL foreclosure process:
o Deeds of trust have a ________ Day Reinstatement Period in which loans can be made good by repaying back payments and any fees and penalties.
90 Day
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
IMPORTANT: Deed of Trust Foreclosure:
NON-JUDICIAL foreclosure process:
o Arizona the MINIMUM time to foreclose is ________ Days due to the Statutory Redemption.
90 Days
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
________:
A sale of real property held by the trustee on behalf of the beneficiary where upon sale a deed is granted by the trustee to the auction winner.
Trustee’s Sale
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Trustee’s Sale:
There is NOT an ACCELERATION clause as the trustee has the legal title already.
There is NOT a ________ in a Deed of Trust Foreclosure in Arizona.
Redemption Period
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Trustee’s Sale:
* A Trustees deed is granted by the trustee to the ________ winner.
* There is NOT an acceleration clause as the trustee has the legal title already.
* There is NOT a redemption period in a Deed of Trust Foreclosure in Arizona.
Public Auction
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
1. The Trustor or borrower ________ on the terms and conditions of the loan.
Defaults
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
2. The ________ records a notice of default and pending notice of trustee’s sale. This is considered giving Constructive Notice.
Beneficiary
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
3. The Beneficiary ________ the trustor of default in writing and instructs trustee to conduct a sale on behalf of the Beneficiary.
Notifies
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
TRUSTEE has the LEGAL title = RIGHT to ________.
Sell
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
4. Constructive Notice is given to the general public by ________ an election to sell real property and trustor (borrower) is given Actual Notice being sent certified mail.
Recording
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
5. The minimum time from date of default to actual trustee’s sale is ________ Days in Arizona.
90 Days
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
6. To give legal notice to the general public, the pending sale must be published in a general circulation newspaper or other periodical for a period of ________ Weeks.
3 Weeks
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
7. Auction and sale can be held on county courthouse steps, in an office of the ________ or in some cases at the actual site of the property.
Trustee
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
8. The beneficiary enters a ________ which must be met in order for a sale to take place. This amount is published before the time of the sale and it maybe the entire amount owed plus fees or another amount that is much lower if the lender does not want the property back.
Reserve Bid
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
9. A Trustees deed goes to the ________ bidder on the property.
Highest
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
10. If there is leftover money after the loan and fees are paid to the beneficiary”.
IMPORTANT:
- Subordinate or junior ________ will get paid with what is left over from the sale.
Lienholders
Deeds, Mortgage, and Taxes:
Steps Taken in an Arizona Foreclosure:
IMPORTANT:
- Remaining money, if any after all costs are paid, goes back to the ________.
Trustor / Borrower
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
The lienholders will be paid back from the sale proceeds in the manner in which they were recorded in time. First in time, is first in line to get paid back. If, after all money has been paid back to the lenders, the excess money from the foreclosure sale will go back to the previous owner.
Excess Money Bid
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
The lender bids the debt that the borrower owes. Basically, the lender gets a credit in this amount. The lender can bid the full amount of the debt, including foreclosure fees and costs, or it might bid less.
Lender’s Credit Bid
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
A bid that occurs when the foreclosing lender submits a written bid less than the amount owed. The foreclosing lender may elect to sue the homeowner who signed the original promissory note, for the amount of the deficiency.
Deficient Bid
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
An act of yielding a position. Lenders usually want to be in first place, but if a lender were to agree to ‘subordinate’ their position, it would mean taking a back seat to the new lender, not likely.
Subordination
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
This clause ensures that a tenant will not be evicted in the event that the landlord goes bankrupt.
Non-Disturbance Clause
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
Owner of the home has the option to ‘give up’ rights and possession to the bank in lieu of a foreclosure.
o Possible to negotiate a deal in which the lender agrees not to pursue a deficiency
judgment.
o These deeds are given to prevent the foreclosure and are less impactful on credit.
Deed in Lieu
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
The lender is required to report the amount of the removed debt to the borrower and to the IRS on FORM 1099-C.
o Used when the forgiven debt is $________ or GREATER, which can result in taxable “INCOME” to the borrower.
Cancellation of Debt
$600
Deeds, Mortgage, and Taxes:
Foreclosure Terms:
* ________:
A lender cannot take further action against a debtor if the foreclosure sale did not cover the entire balance of the loan due to the lender.
Anti-Deficiency Laws
Deeds, Mortgage, and Taxes:
Arizona Deficiency Laws:
o In the Arizona Revised Statutes ________, Anti-Deficiency Laws are found and mean that a lender cannot take further action against a debtor if the foreclosure sale did not cover the entire balance of the loan due to the lender.
Section 33
Deeds, Mortgage, and Taxes:
Arizona Deficiency Laws:
o These statutes prevent a lender from seeking a deficiency judgment after foreclosure
only if:
The loan was made to ________ purchase the home
The property is less than ________ Acres in size
Single family or duplexes only There can be no more than ________ Units.
Must be ________
Investments, commercial, rentals and second homes are ________.
o MAY NOT apply to ________ Insured Loan or ________ Money used
Help
2.5 Acres
2 Units
Primary Residence
Excluded
Federally
HELOC
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
Click which steps are NOT part of the Arizona Deed of Trust Foreclosure process:
Borrower is in default
Mortgagee files a suit with the courts
Trustee holds legal title and legally can sell
Trustee holds sale and awards highest bidder trustee deed
Beneficiary must give 6 month redemption period
Mortgagee files a suit with the courts
Beneficiary must give 6 month redemption period
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
Choose the following statements about foreclosure that are correct:
The minimum time for foreclosure is 60 days
There is NOT a redemption period in a Deed of Trust Foreclosure in Arizona.
A Trustees deed goes to the highest bidder on there property
Deed in Lieu solidifies the foreclosure and affects credit greatly
There is NOT a redemption period in a Deed of Trust Foreclosure in Arizona.
A Trustee’s deed goes to the highest bidder on the property.
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
In the Arizona Revised Statutes SECTION 33, ANTI-DEFICIENCY laws are found and mean that a lender can NOT take further action against a DEBTOR if the foreclosure sale did NOT cover the entire ________ of the loan due to the lender.
Balance
These statutes prevent a lender from seeking a deficiency judgment ________ foreclosure only if:
1. The loan was made to help purchase the home
2. The property is less than 2 1/2 acres in size
3. Single family or duplexes only (no more than 2 units)
4. Must be Primary Residence
5. Investments, commercial, rentals and second homes are excluded
* MAY NOT apply to Federally Insured Loan or HELOC Money used
After
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Case Study:
Who/what entity is legally selling the home during the foreclosure process in Arizona?
Arizona is a Lien Theory state, and we use the Trust Deed. As such, we use Trustees who hold legal title, which allows them the “Right to Sell” the property.
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Case Study:
If the lender (beneficiary) did not receive the entire balance of the loan due from the sale of a foreclosed property, can they (the beneficiary) pursue further funds from the borrower (trustor)? What is this type of law called?
A lender cannot take further action against a debtor if the foreclosure sale did not cover the entire balance of the loan due to the lender. It is Anti-Deficiency laws.
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Case Study:
What certificate is issued to the winning bidder of a mortgage foreclosure?
At the time of sale, the winning bidder is issued a “Sheriff’s certificate” or a “Certificate of Sale.”
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Case Study:
What is a non-recorded, specific, involuntary, 1st priority lien?
In Arizona, all property taxes are a “lien against the property,” which isn’t recorded. Property Tax Liens are always 1st in Lien Priority (They get paid 1st, no matter what) and are specific, involuntary Lien.
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
In a state where Trust Deeds are used, who has the right to sell the property in case of a foreclosure?
Original Lender
Trustee
Beneficiary
Grantor
Trustee
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
In Arizona what is the reinstatement period for property owners when a foreclosure has been filed?
120 Days
100 Days
90 Days
60 Days
90 Days
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
A buyer at an auction of a foreclosed property in Arizona would obtain what type of deed if the beneficiary was the lender?
Auction and Sale Deed
Deed in Lieu
Trustee Deed
Beneficiary Deed
Trustee Deed
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
A borrower falls behind on his payments to the lender. The beneficiary would record a Notice of Default and Pending Notice of Foreclosure. This would serve what purpose?
Giving Eviction Notice to the owners
Giving Constructive Notice to the Public
Giving Elective Notice to the Trustee
Giving Substantial Notice to the Lienor
Giving Constructive Notice to the Public
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
Money that was used for the purchase of a home that was declared to be a primary residence is not fully recovered after a trustee sale. The lender is unable to take further action against the former owners in Arizona due to what Law?
Homestead Law
Homeowner Protection Law
Declared Protection Law
Anti-Deficiency Law
Anti-Deficiency Law
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
The lender, upon a borrower missing payments would call the loan balance due, this is due to what clause?
Action Clause
Call to Auction Clause
Deed in Lieu Clause
Acceleration Clause
Acceleration Clause
Deeds, Mortgage, and Taxes:
Deed Of Trust Foreclosure Process In Arizona:
Quiz:
Husband and wife had a mortgage in Arizona and defaulted after making 112 monthly payments on a 15 year loan. This was their primary home and the money borrowed was used as purchase money. The statutory redemption period is how long for the husband and wife?
90 days
120 days
270 days
180 days
180 days
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
o The power to collect taxes in Arizona falls under the “________” which we will discuss later but REMEMBER: Taxation = Government Power. (PETE)
o States, Counties and Cities collect taxes to fund their operations and schools.
Government Powers
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
o Taxes are always paid in “________” or in the PAST
You previously enjoyed the use of the property,
Taxes come due after you enjoyed the use
Relate to it as you stay in a hotel, pay your bill on check out (after use)
Arrears
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
Property Taxes are Levied ________
Property Taxes CAN be paid ________
Annually
Semi-Annually
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
o IMPORTANT: In Arizona, all property taxes are a “________” which isn’t recorded.
Lien Against the Property
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
o IMPORTANT: Property Tax Liens are always ________ in Lien Priority (They get paid 1st, no matter what)
1st
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
o IMPORTANT: Property taxes are a Specific, ________ Lien
Involuntary
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
o Most often, property taxes are paid by the LENDER who impounds the monthly account
and collects the taxes over 12 MONTHS and PAYS the bill when it becomes available.
Lien is ________ placed on all real property every January 1.
Silently
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
IMPORTANT: Real Property owners who more than $100 can pay taxes in two installments.
* The First payment is due ________ of the current year
* The second is due ________ of the following year.
If you owe less than $________, your payments are due October 1 of current year.
October 1
March 1
$100
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
If you owe less than $100, your payments are due October 1 of current year.
o However, failure to pay the tax bill will result in a possible recorded lien and eventual foreclosure due to ________ of taxes owed.
Non-Payment
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
If a real property owner falls behind on their taxes, they can make ________ to the Assessor where the taxes are due.
Installment Arrangements
Deeds, Mortgage, and Taxes:
Property Taxes in Arizona:
Interest on the back taxes will accrue and it is at a rate of ________%
This is known as the “________”.
This rate is the HIGHEST interest rate allowed for borrowers who do not agree
to an otherwise negotiated rate.
16%
Legal Rate
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________ = Property taxes become an unrecorded lien on real property.
January 1
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________ = County assessor mails a notice of valuation to all owners.
Month of January
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________ = Real Property owners receive their tax bill.
Late August/Early September
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________: First half of the current year’s tax bill due. October 1= Due/November 1 = Late
October 1
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________: First half current year’s taxes are now considered delinquent.
November 1
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________: Second half of the current year’s taxes due. March 1 = Due/May 1 = Late
March 1
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________: Second half current year’s taxes are now considered delinquent.
May 1
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
* ________: Delinquent notices are sent to unpaid owners.
September
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
o ________: Tax lien sold at auction for payment of taxes.
February of Next Year
Deeds, Mortgage, and Taxes:
Tax Dates and Calendar of Events in Arizona:
IMPORTANT: October, November, March, May, September, February!
Acronym: O.N.M.M.S.F:________
Oh No, More Money, Send Funds
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
o Arizona uses ________ of a property and is determined by Legislation and enacted in the Arizona Revised Statutes.
Assessed Values
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
o In order to find the assessed value, we use a simple equation that uses the ________ and we multiply that by the prescribed ________.
o Also known as “________”, market value is what the counties feel your
property is worth.
There is a formal process one must go through if the feel that their property is ________ too high.
Current Market Value
Assessed Ratio
Full Cash Value
Valued / Taxed
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o ________:
Is also unique to Arizona. This is a value calculated according to a statutory formula, designed to reduce the effect of inflation on property taxes.
Limited Property Value
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o Market Value (MV) x Assessed Ratio (AR) = ________
Assessed Value (AV)
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
1. ________ = 18%
2. ________ = 16%
3. ________ = 10%
4. ________ = 10%
Commercial Property
Vacant Land
Rented Residential Property
Residential Property
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
1. Commercial property = ________%
2. Vacant Land = ________%
3. Rented Residential Property = ________%
4. Residential Property = ________%
18%
16%
10%
10%
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
1. ________ = 18%
Commercial property
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
2. ________ = 16%
Vacant Land
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
3. ________ = 10%
Rented Residential Property
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
4. ________ = 10%
Residential Property
Deeds, Mortgage, and Taxes:
Tax Rates in Arizona:
Limited Property Value:
o The assessed ratios are divided into 4 different categories:
IMPORTANT: Rentals MUST be reported as an income producing property to the State. It is still taxed at ________% rate, but there is an additional rental tax collected on the rent every month.
10%
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o IMPORTANT: When a real property owner’s taxes are not paid, they become delinquent and under the power of the government, they can legally ________ at a tax sale in order to collect on the taxes that are owed.
Sell the Property
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o If delinquent taxes are not paid by ________, the county assessor will send notice to the owner that they are delinquent and facing a tax sale in ________ of next year.
September
February
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o IMPORTANT: The “Actual Notice” sent to the owner will include the amount owed, interest and will clearly state a delinquent tax rate of ________%.
16%
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o County Assessor will obtain a ________ from the county courts which will legally allow the assessor to hold the delinquent tax sale.
Judgement Order
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
________: Many counties have an in person live auction where the taxes are sold.
Live Auction
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
________:
More progressive counties are opting to do online tax sales,
which draws a larger crowd from around the country and usually increases the
bidding.
On-Line Auction
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o Assessor will advertise in a publication of general circulation of pending tax sale for a period of ________ weeks to inform the public. This is deemed as constructive notice.
3 Weeks
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
At time of auction of real property taxes, opening bid starts at 16%.
Bidders “________” from the 16% Legal Tax Rate.
The winning bidder is the one who accepts the ________ tax interest rate.
The Assessor charges the property owner 16% and keeps the ________ between what the winning bidder accepted at lowest rate.
Bid Down
Lowest
Difference
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
IMPORTANT: At time of sale, the winning bidder is issued a “________” and pays the back taxes, interest and penalties for that real property.
Certificate of Purchase
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
The delinquent tax rate in Arizona is:
12%
10%
14%
16%
16%
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o The “________” now starts.
3 Years is the redemption period.
Starts AFTER the sale, not from the time taxes were originally due.
Tax Sale Redemption Period
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
o At the end of the ________ Year redemption period, if the property owner has not paid back the investor in full, the investor has the right to go to court to exchange the
certificate of purchase for ________.
3 Year
Treasurer’s Deed
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
The investor will now take ownership of the ________.
Any and all liens are now wiped out.
Investor will own that property free and clear.
Real Property
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
- Assessor will advertise in a publication of general circulation of pending tax sale for a period of ________ Weeks to inform the public. This is deemed constructive notice.
3 Weeks
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
- At time of auction of real property taxes, “________” starts at 16%.
- Bidders “________” from the 16% Legal Tax Rate.
- The winning bidder is the one who accepts the LOWEST tax interest rate.
Opening Bid
Bid Down
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
- The Assessor continues to charge the property owner 16% but the county keeps the ________ between what the winning bidder accepted at lowest rate.
Difference
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
IMPORTANT: At time of sale, the winning bidder is issued a “________” and pays the back taxes, interest and penalties for that real property.
Certificate of Purchase
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
- The Assessor continues to charge the property owner 16% but the county keeps the ________Difference between what the winning bidder accepted at lowest rate.
Difference
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
IMPORTANT: At time of sale, the winning bidder is issued a “________” and pays the back taxes, interest and penalties for that real property.
Certificate of Purchase
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
Tax Sale Example:
GO OVER THIS A FEW TIMES
Homeowner owes $1000 in taxes to the county but is delinquent and hasn’t paid. The county auctions off the taxes owed and offers a ________ to the bidders.
Return on Investment (ROI)
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
Tax Sale Example:
GO OVER THIS A FEW TIMES
The bidders start at 16% and bid ________. The lowest bidder bids 5% and the county awards certificate of purchase. The bidders pays the county the $1000 on behalf of the homeowner.
Downward
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
Tax Sale Example:
GO OVER THIS A FEW TIMES
The certificate holder will collect 5% from the county, while the county is collecting 16% from the homeowner. This is a ________ of 11% to the county, plus they received the money they needed to pay for services.
Net Gain
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
Tax Sale Example:
- The “________” now starts.
- In Arizona, 3 Years is the redemption period.
- Starts AFTER the sale, not from the time taxes were originally due.
Tax Sale Redemption Period
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
Public Tax Auction:
Tax Sale Example:
- At the end of the 3 year redemption period, if the property owner has not paid back the investor in full, the investor has the right to go to court to exchange the certificate of purchase for a ________.
- The investor will now take ownership of the Real Property
- Any and all liens are now wiped out.
- Investor will own that property free and clear.
Treasurer’s Deed
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
________ = A deed that the certificate of purchase holder is granted by the treasurer after the statutory redemption period has passed.
Treasure’s Deed
Deeds, Mortgage, and Taxes:
Delinquent Taxes and Foreclosure:
How long does the Tax Sale Redemption Period last?
5 years
3 years
2 years
No Limit
3 Years
Deeds, Mortgage, and Taxes:
Taxes:
Case Study:
If a real property owner falls behind on their taxes, they can make installments to the assessor where the taxes are due. Interest on the back taxes will accrue, and it is at a rate of 16%. This is known as the “________”. This is the highest interest rate allowed for borrowers who disagree with an otherwise negotiated rate.
Legal Rate
Deeds, Mortgage, and Taxes:
Taxes:
Case Study:
How are property taxes calculated?
Property taxes are calculated using the assessed value of the property. This includes both the land and the buildings on it.
Deeds, Mortgage, and Taxes:
Taxes:
Case Study:
How is assessed value calculated?
To find the assessed value, we use a simple equation that uses the Current Market Value, and we multiply that by the prescribed Assessed Ratio. Market Value (MV) x Assessed Ratio (AR) = Assessed Value (AV)
Deeds, Mortgage, and Taxes:
Taxes:
Case Study:
When property owners fail to pay their property taxes, what information is included in the “actual notice” sent to them?
The “actual notice” sent to the owner will include the amount owed interest and clearly state a delinquent tax rate of 16%.
Deeds, Mortgage, and Taxes:
Taxes:
Quiz:
Property taxes in Arizona are due October 1st and March 1st, when do taxes in Arizona become an unrecorded lean against all property?
January 1st
March 1st
May 1st
November 15th
January 1st
Deeds, Mortgage, and Taxes:
Taxes:
Quiz:
Property Taxes are what type of lien?
Voluntary
Specific
General
Both A and B
Specific and Involuntary
Deeds, Mortgage, and Taxes:
Taxes:
Quiz:
Property Taxes in Arizona are paid?
Once every two years
Monthly
In arrears
Up front
In Arrears
Deeds, Mortgage, and Taxes:
Taxes:
Quiz:
What Month are delinquent tax notices sent out to homeowners in Arizona?
September
May
November
Augus
September
Deeds, Mortgage, and Taxes:
Taxes:
Quiz:
When the sheriff acts as the grantor, which financing instrument is used?
Land Contract
Mortgage
Deed of Trust
Promissory Note
Mortgage
Deeds, Mortgage, and Taxes:
Taxes:
Quiz:
Of the following parties listed below, which one does not receive monthly payments?
Trustee
Beneficiary
Vendor
Mortgagee
Trustee
Property Tax Math:
When working on tax problems, don’t forget that the assessed value of a property is the valuation percentage used for the purposes of ad valorem taxes.
The tax rate can be shown in terms of a dollar amount per one hundred dollars of
assessed value of assessed value shown as $100 or it can be shown in mills. Mills are 1/10 of a cent or
1/1000 of a dollar and is written as .0001.
Formulas Used:
_______ = Tax Rate x Assessed Value
Annual Taxes
Property Tax Math:
When working on tax problems, don’t forget that the assessed value of a property is the valuation percentage used for the purposes of ad valorem taxes.
The tax rate can be shown in terms of a dollar amount per one hundred dollars of
assessed value of assessed value shown as $100 or it can be shown in mills. Mills are 1/10 of a cent or
1/1000 of a dollar and is written as .0001.
Formulas Used:
_______ = Annual Taxes ÷ Assessed Value
Tax Rate
Property Tax Math:
When working on tax problems, don’t forget that the assessed value of a property is the valuation percentage used for the purposes of ad valorem taxes.
The tax rate can be shown in terms of a dollar amount per one hundred dollars of
assessed value of assessed value shown as $100 or it can be shown in mills. Mills are 1/10 of a cent or
1/1000 of a dollar and is written as .0001.
Formulas Used:
_______ = Annual Taxes ÷ Tax Rate
Assessed Value
Property Tax Math:
Cotton City determines their annual operating budget is $1,000,000 and total assessed value of property is $50,000,000. What is the tax rate expressed in both mills and dollars?
- $1,000,000 ÷ $50,000,000 = .02 -OR- $2.00 per $100 of assessed value.
ANSWER: $2.00 per $100 of assessed value.
Property Tax Math:
Jim Jones property has an assessed value of $70,000. The tax rate is $1.25 per $100 of
assessed value. What are his annual taxes?
$70,000 divided by 100 = 700 x $1.25 = $875
ANSWER: $875 in annual taxes
Property Tax Math:
You recently paid $1,485 in annual taxes, based on a tax rate of $1.742 per $100 of
assessed value. What is the assessed value of your property as determined by the assessor?
- $1.742 ÷ 100 = .01742 = Mills Rate
- $1,485 ÷ .01742 = $85,247
ANSWER: $85,247 Assessed Value
Property Tax Math:
You recently received your tax bill of $1,120, which showed the assessed value of your property to be $59,230. What is the tax rate for the county where this house is located?
- $1,120 ÷ $59,230 = .0189
- .0189 x 100 = $1.89
ANSWER: $1.89 per $100 of assessed value
Property Tax Math:
The assessed value of a home is $42,100 and the tax rate is $3.61 per $100 of assessed value. How much will the annual tax be?
- $42,100 ÷ 100 = 421
- 421 x $3.61 = $1,519.81
ANSWER: Annual tax of $1,519.81
OR - 3.61 ÷ 100 = .0361
- .0361 x $42,100 = $1,519.81
ANSWER: Annual tax of $1,519.81
