Homestead Exemption Protects $400,000 of the Equity in a Home

Question: My parents only have their monthly Social Security payments for living expenses, and they have fallen behind on their mortgage payments for their Scottsdale condominium. Their mortgage lender has now scheduled a foreclosure sale in May. My parents’ Realtor says that their Scottsdale condominium has equity of at least $500,000, and that she is confident that she will be able to sell the Scottsdale condominium before the May foreclosure sale. My parents will then live with us in the casita in our backyard. What if their Realtor doesn’t sell the home before the May foreclosure sale?

Answer: Under the Arizona Homestead law, ARS §33-1101, if there is a foreclosure sale of a primary residence resulting in more than $400,000 in sales proceeds, your parents as owners of the home should receive at least $400,000. Beginning January 1, 2024 this $400,000 protection is adjusted annually based on the cost of living. Thus, if there is a February 2025 foreclosure sale of your parents’ Scottsdale condominium, the exact amount of the sale proceeds to your parents can probably not be determined until after the foreclosure sale. Note: if the sales proceeds at the foreclosure sale are less than $400,000, your parents should receive all of the sales proceeds.