Arizona Real Estate License Real Estate Financing Concepts Questions and Answers 1 — Questions and Answers
Question 1: In Arizona, a deed of trust is the most common instrument used to secure a loan on real property. Which of the following correctly identifies the parties to a deed of trust?
- Mortgagor, Mortgagee, and Trustee
- Grantor, Grantee, and Beneficiary
- Trustor, Trustee, and Beneficiary (Correct answer)
- Lender, Borrower, and Title Company
Correct answer: Trustor, Trustee, and Beneficiary
A deed of trust in Arizona is a three-party instrument. The Trustor is the borrower, the Beneficiary is the lender, and the Trustee is a neutral third party (often a title company or attorney) who holds the legal title to the property as security for the loan.
Question 2: A homeowner in Arizona defaults on their loan, which is secured by a deed of trust. The lender initiates a non-judicial foreclosure. What is the minimum period of time that must pass between the recording of the 'Notice of Trustee's Sale' and the actual sale date?
- 30 days
- 60 days
- 120 days
- 90 days (Correct answer)
Correct answer: 90 days
Arizona law (A.R.S. § 33-808) requires that a non-judicial foreclosure sale, or Trustee's Sale, cannot take place sooner than the 91st day after the Notice of Trustee's Sale is recorded. This provides a 90-day notice period for the homeowner.
Question 3: A borrower in Phoenix obtains a loan to purchase a single-family home on a half-acre lot and later defaults. The lender forecloses via a trustee's sale, and the sale price is less than the outstanding loan balance. Under Arizona's anti-deficiency statutes, which statement is true?
- The lender can sue the borrower for the deficiency because the property is in a major metropolitan area.
- The lender cannot pursue a deficiency judgment against the borrower. (Correct answer)
- The lender can only pursue a deficiency judgment if the loan was a refinance, not a purchase money loan.
- The lender must wait one year before filing for a deficiency judgment.
Correct answer: The lender cannot pursue a deficiency judgment against the borrower.
Arizona's anti-deficiency statute (A.R.S. § 33-814(G)) protects borrowers from deficiency judgments after a trustee's sale if the property is 2.5 acres or less and contains a single one-family or two-family dwelling. Since the property fits this description, the lender's only recourse is the property itself.
Question 4: A loan agreement includes a clause that allows the lender to demand immediate payment of the entire outstanding loan balance if the borrower misses a certain number of payments or otherwise breaches the contract. What is this clause called?
- Subordination Clause
- Defeasance Clause
- Acceleration Clause (Correct answer)
- Alienation Clause
Correct answer: Acceleration Clause
An acceleration clause gives the lender the right to 'accelerate' the due date of the entire loan balance upon a borrower's default. This is a standard clause in most mortgage and deed of trust documents.
Question 5: Regarding Arizona's usury laws for real estate loans between private parties, which of the following is most accurate?
- The maximum legal interest rate is strictly capped at 10% per annum.
- Any interest rate may be agreed upon, as long as it is specified in a written contract. (Correct answer)
- Usury laws do not apply to any loans secured by real property.
- The maximum interest rate is determined by the federal prime rate plus 5%.
Correct answer: Any interest rate may be agreed upon, as long as it is specified in a written contract.
According to Arizona statute A.R.S. § 44-1201(A), the legal rate of interest is 10% per annum UNLESS a different rate is contracted for in writing. If it is in writing, any rate of interest may be agreed to between the parties, effectively removing a strict ceiling for contractually defined rates.
Question 6: An Arizona buyer is purchasing a property using an 'Agreement for Sale,' also known as a land contract. In this arrangement, when does the buyer typically receive legal title to the property?
- Immediately upon signing the Agreement for Sale.
- After making the final payment according to the contract terms.
- Once they have paid 50% of the total purchase price. (Correct answer)
- As soon as the agreement is recorded with the county recorder.
Correct answer: Once they have paid 50% of the total purchase price.
In an Agreement for Sale, the seller (vendor) retains legal title to the property as security, while the buyer (vendee) receives equitable title and possession. The seller only delivers the deed, transferring legal title, after the buyer has fulfilled all the payment obligations outlined in the contract.
Arizona Real Estate License Real Estate Financing Concepts Questions and Answers 1
In Arizona, a deed of trust is the most common instrument used to secure a loan on real property.
Which of the following correctly identifies the parties to a deed of trust?