Anti deficiency ARS 33-814 provides protection to the borrowers in some cases against a deficiency judgement when their property has gone through a foreclosure. In many cases, it appears the lenders are recognizing the limitations this statute puts on them to obtain a judgement after the deed transfer takes place and they are willing to allow a short sale. In a Short Sale there is nothing that prohibits them from asking for seller contributions as a part of the demand letter stating the conditions that they are willing to accept to release the lien on the property. Conditions could include additional monies at closing or a repayment of all or part of the loan over a period of time. This applies to any deed of trust lien on the property.
Any lien in anything other than the primary position is wiped out during a foreclosure. In some states which don't have an anti-deficiency statute, the lender can pursue a judgement against the home owner. The Arizona Anti Deficiency statute prevents the lender (primary or otherwise) from seeking a deficiency judgement against the foreclosed property owner if the property is 2.5 acres or less, is used as a single family or single two family dwelling and the lien(s) were used to purchase the home.
In a short sale, the Anti-Deficiency law does not apply. When an offer has been evaluated by the lien holders in a short sale they will provide a letter which states which conditions the lien holder is willing to release the lien. The primary lien holder will have the final say on how much money of the total purchase price will be assigned to each lien holder. The amount of money the suborinate lien holders want may match what the primary lien holder wants or it may be more than what is provided. The seller (owner or designate) will have to negotiate between the primary and subornate lien holders to get the best possible resolution to be able to sell the house. This usually entails restating seller financial conditions that caused the loss in the first place, describe the current market conditions and provide additional information to sway the subornate lien holdes to reduce their demand to match or come close to what the primary lien holder wants to provide. If the primary lien holder will not provide enough money to satisfy the subnornate lien holders, you may be able to get terms. The amount of wiggle room you have is dependent on the assest owners guidlines and your ability to provide supporting information. You are working with a system that has little regard for the individual problem and is more focused on the overall financial picture over many liens. The servicing groups, lenders and investors have their guidlines and those are not very flexible.
When the negotiations have been complete, the seller (owner) has to decide what they can afford financially to meet the lien holder demands. If they can not or will not meet the lien holder demands there are two options. First is to try and split a part of the lien holder demands with the buyer. My suggestion for sellers and their Realtor is to work with the buyers and buyers agents to see if there is a way for each party to contribute to the lenders demands. The buyers are typically getting a very good value, so while there is often a lot of grumbling, buyers are often getting a great deal anyway. This is very dependent on how well the buyers agent can represent the value of the property, understands the short sale process and sets buyer expecations early in the game that this type of problem may stick its ugly head up. It is a team effort to get these negotiations done successfully and being up front with everyone when this problem comes up is critical to success. In some cases the issue becomes highly emotional, so its important that everyone look at this from a value perspective to the buyer and the seller realize that over the long run closing the short sale will have more long term financial advantages over the short term costs.
Most certainly I recommend for buyers and sellers to talk to a real estate attorney who deals in residential issues for more clarification on the Arizona Statutes concerning anti-deficiency.