Question: Seven years ago, when the land market was booming, we sold 40 acres of our farmland near Tonopah in western Maricopa County for $1,200,000. The buyer paid $200,000 cash to us, and we did seller carryback financing for seven years of annual payments, interest only, on the balance of $1,000,000. The buyer has made only the first annual payment. The buyer is a Utah limited liability company with significant Utah assets, and we have personal guarantees from two of the members of the Utah limited liability company. What do we need to do to get the money owed to us, or at least get the land back?
Answer: You need to contact an attorney or a title company to conduct a trustee’s sale — that is, foreclosure — of the 40 acres of farmland. The date of the trustee’s sale should be scheduled in four to six months.
Before that time, you should get an appraisal of the 40 acres of farmland, or at least get a broker’s price opinion (“BPO”) of comparable sales of other farmland, in the Tonopah area. You should be prepared to make a “credit bid” at the trustee’s sale in the amount of the value of the farmland.
In the unlikely event that there are other bidders, you would need to make a business decision about whether to increase your “credit bid” — that is, how much of the delinquent loan amount you may want to make as a bid. If you are the winning bidder, you may file a lawsuit up to 90 days after the sale to collect from the buyer the deficiency — the difference between the amount of the delinquent loan, less your credit bid or less the land’s value, whichever is greater.
The buyer’s only defense generally would be a “battle of the appraisers.” In other words, the buyer would get an appraisal or a BPO showing that the value of the 40 acres of farmland was greater than your credit bid. The court would schedule a hearing to determine the value of the farm land and then award you a judgment for the amount of any deficiency owed by the buyer, plus attorney’s fees and court costs.