What is a Real Estate Surplus
Surplus Funds from Foreclosure: What You Need to Know
When a property is foreclosed upon, typically due to a defaulted mortgage, it is sold at a public auction. The proceeds from the sale are used to pay off the outstanding mortgage owed to the lender. If the auction sale price exceeds the amount owed, the remaining funds are known as "Surplus Funds."
Example of Surplus Funds
For instance, if a property owner defaults on their mortgage and the amount owed to the lender is $300,000, the property may be sold at a foreclosure auction for $350,000. In this scenario, the lender would be paid the first $300,000 to settle the mortgage. The remaining $50,000 constitutes the surplus funds.
What Happens to Surplus Funds?
After the foreclosure sale, the surplus funds are usually deposited with the court or an appointed entity. The proper distribution of these funds is determined through a legal process. Interested parties must file the necessary claims to access these funds, which will only be disbursed based on a court order.
Who Is Entitled to Surplus Funds?
Generally, if no other liens or claims exist, the original property owner has the right to claim the surplus funds. However, other lienholders may have priority, depending on the circumstances. Common lienholders include:
Holders of a second mortgage
Judgment creditors
Government entities, such as the IRS
For a lienholder to claim surplus funds, they must have been included as a defendant in the original foreclosure lawsuit and must file a formal Notice of Claim to Surplus Funds with the court. All parties with an interest in the funds, including the property owner, are required to participate in a surplus funds proceeding to establish their entitlement.
How to Claim Surplus Funds
To initiate a surplus funds proceeding, a title report is typically required to identify any liens against the foreclosed property. The court will prioritize payment of these liens based on the order they were recorded. All lienholders must notify others with claims to the surplus funds, giving them an opportunity to assert their rights. If lienholders or the property owner fail to respond, they may lose their ability to claim any funds.
After all valid liens are paid, any remaining surplus funds will be distributed to the property owner.
What Happens If Surplus Funds Are Unclaimed?
If surplus funds are deposited with the court and remain unclaimed, they will stay there indefinitely until someone files a claim. In many jurisdictions, if the funds are unclaimed for an extended period (such as five years), they may be transferred to the state as abandoned property.
Need Help Claiming Surplus Funds?
Navigating the process of claiming surplus funds can be complicated, but help is available. Surplus Champions, LLC specializes in assisting individuals in recovering these funds. We handle the legal complexities, ensuring your claim is properly filed and pursued.
If you believe you are entitled to surplus funds from a foreclosure, contact Surplus Champions, LLC today for a consultation. Let us help you secure what is rightfully yours.