We Dodged the Anti-Deficiency Bullett

You might recall from my previous post about anti-deficiency, that Arizona was just about to find itself in a baaaad place for home owners. Here is the recap:

• Arizona is traditionally an anti-deficiency state. I.e., if the bank takes back your property and sells it at a loss, they can’t come after you for the difference.

• A legislator (Republican Senator Steve Pierce, R-Prescott) attempted to change that law so that people who lost their homes to the banks within 6 months of purchasing (presumably investors), could be pursued by the banks.

Problem: it would have encouraged more foreclosures and bankruptcies. Here is why: Arizona has a relatively short foreclosure period (90 days). If banks know that all they have to do is wait out an owner in order to foreclose and still be able to go after the deficiency, then they are more likely to do that. This will impact more than just people who are flipping homes. This could impact all kinds of buyers, not just “flippers.”

So, the Arizona Association of Realtors (AAR), who did not see the implications when the bill first passed, were successful in moving legislation to overturn the original bill  –with the help of the original author, who should consider thinking through legislation in the future.

Moral of the story:

1. Lawmakers need to think through things a little more thoroughly;

2. The AAR lobbyists might have been a little too busy helping the home builders undermine local cities’ ability to collect impact fees or improve energy efficiency of homes to catch this one early.

I’m just sayin’.