How to Sell a Mortgage Note in Arizona

Arizona has several features that make it one of the stronger states for holding, and transacting, private mortgage notes.

Fast foreclosure process. Arizona is a deed of trust state where foreclosure doesn't require court involvement. If a borrower defaults, the trustee can proceed with a trustee's sale directly. The entire process can be completed in roughly 90 days. For lenders and note investors, this speed and predictability reduces risk significantly.

Deed of trust state. Like Texas, Arizona uses deeds of trust rather than mortgages. This structure provides clear legal pathways for enforcement and makes security interests easier to perfect and protect.

Strong property appreciation. The Phoenix metro (which accounts for the majority of Arizona's population and real estate activity) has experienced significant appreciation. Scottsdale, Mesa, Chandler, Gilbert, and Tempe have all seen strong growth. This means the properties backing Arizona notes tend to have healthy equity, which improves note quality.

Growing seller-financing activity. As conventional lending tightened from 2022 onward, Arizona saw a meaningful uptick in seller-financed transactions. Note holders in the state are increasingly common, and the secondary market is responding.

No special restrictions on note sales. Arizona doesn't impose unusual regulatory hurdles on the sale or assignment of private mortgage notes, making transactions relatively straightforward.

Typical note sizes. Residential notes in Arizona most commonly range from $150,000 to $500,000, with the highest volume in the $200,000-$400,000 range. The Phoenix metro dominates, but Tucson and the Flagstaff area also produce notable volume. Small commercial notes range from $200,000 to $2 million.

Property types. Single-family residences are the most common and most marketable. Arizona also has a healthy supply of condo and townhome notes, particularly in resort and retirement communities (Scottsdale, Sun City, Sedona). Small commercial properties (retail strip centers, professional offices) trade regularly.

Active regions. The Phoenix metro (including Scottsdale, Mesa, Chandler, Gilbert, and Tempe) generates the lion's share of Arizona note activity. Tucson is the state's second-largest market. Notes on properties in northern Arizona (Flagstaff, Prescott, Sedona) are less common but can carry premium pricing due to desirable locations.

Market trend. Arizona's real estate market cooled somewhat from its 2022 peak, but values remain well above pre-pandemic levels. This means notes created during the 2020-2024 boom are generally well-collateralized, with borrowers carrying significant equity.

Step 1: Organize your documents. You'll need the original promissory note, the recorded deed of trust, payment history, and property details. Arizona's deed of trust system means your security instrument was recorded with the county recorder's office at closing, so you can request a copy there if needed.

Step 2: Get quotes. Reach out to multiple note buyers. Arizona's growing market means more buyers are familiar with the state, but the market is somewhat smaller than Florida or Texas. Getting at least 2-3 competing offers is important.

Step 3: Due diligence. The buyer will verify the property value, typically through a BPO or appraisal. Arizona title searches are generally clean and efficient, particularly in Maricopa County (Phoenix metro) where the county recorder's digital systems make title research straightforward.

Step 4: Close the sale. The note is assigned, endorsed, and delivered. UCC filings are completed. Arizona transactions typically close through a title company or escrow agent.

Typical timeline in Arizona: 30 to 45 days from first contact to funding.

For a full walkthrough of the process, see our national guide: How to sell a mortgage note.

Arizona does have a state income tax, which currently applies a flat rate. This means Arizona note sellers face both federal and state capital gains taxes when they sell.

Combined with the buyer's discount, the total cost of selling an Arizona note can be higher than in no-tax states like Florida and Texas.

For a detailed tax breakdown, see our guide on taxes when selling a mortgage note.

If you hold a note on an Arizona property and the math of selling doesn't add up, you're not stuck.

Hypothecation (borrowing against your note rather than selling it) works especially well in Arizona thanks to the state's deed of trust structure and efficient UCC filing process. You keep full ownership of your note, continue collecting your monthly payments, and avoid both the buyer's discount and the capital gains tax entirely.

Arizona's strong property values provide a solid collateral foundation, and the state's legal framework means the lender's security interest is well-protected.

Learn more in our guide on what is note hypothecation, and see how real note holders have used this approach in our success stories.