What Are Surplus Funds in a Foreclosure?

What Are Surplus Funds In A Foreclosure?

What are surplus funds in a foreclosure? Often called overage or excess funds, surplus funds refer to the remaining money after a property is sold at a foreclosure auction and the mortgage balance is fully paid off. When a property sells for more than what is owed to the lender, the leftover amount is classified as surplus funds. Knowing how these funds work and the steps to claim them is important for anyone involved in a foreclosure.

How Can You Claim Surplus Funds?

If you owned a property before it went into foreclosure, you might be eligible to claim any surplus funds from the sale. The trustee overseeing the foreclosure auction is responsible for managing these funds. Their contact details are typically included in the Notice of Trustee Sale, which can be accessed from public records if needed. To claim the funds, reach out to the trustee shortly after the auction.

Who Gets Paid Before You?

Before you can access any surplus funds, junior lienholders, such as second mortgage lenders or creditors, must be paid in order of priority. If you believe certain claims on the funds are invalid, you can challenge them in court. In cases of legal disputes, the trustee will transfer the funds to the court until the matter is resolved.

How Much Time Do You Have to File a Claim?

The timeline for claiming surplus funds is often limited. Trustees typically have 30 days after the foreclosure sale to notify all relevant parties, including previous homeowners and lienholders, about the surplus funds. Once notified, you usually have another 30 days to submit your claim. Failing to act within this period could result in losing your right to the funds.

Do You Need to Pay Someone to Collect Surplus Funds?

No. You are not required to pay anyone to collect surplus funds on your behalf. The trustee assigned to the foreclosure auction is responsible for distributing these funds without additional charges. Be cautious of individuals or businesses offering to help retrieve surplus funds for a fee, as some may operate unlawfully or charge unreasonable amounts. Verify the credentials of anyone offering assistance and proceed carefully.

What Happens If You’re Not Notified About Surplus Funds?

If the trustee cannot locate the former homeowner, any unclaimed surplus funds are forwarded to the state’s unclaimed property division. To avoid missing out on potential funds, ensure you file a forwarding address with the postal service after leaving the foreclosed property. You can also check with your state’s unclaimed property office to see if any funds are being held for you.

Understanding what surplus funds in a foreclosure are and how to claim them can provide significant financial relief. Acting promptly and knowing your rights will ensure you don’t miss the opportunity to recover these funds.