Deficiency Actions and Fair Market Value
In this turbulent real estate market, many commercial properties are being foreclosed upon. In a typical trustee's sale, the trustee may make a credit bid of the amount that it believes the property is worth, which may be far less than the underlying debt.
When that occurs, the lender can then sue the debtors and personal guarantors for the deficiency.
But, under Arizona law, both a guarantor and the debtor have the right for a court to determine the fair market value of the property at the time of the trustee's sale. If the court determines that the fair market value is equal to or greater than the outstanding debt, then the deficiency is wiped out.
