FORECLOSURE SURPLUS FUNDS: A HIDDEN ASSET YOU SHOULDN’T OVERLOOK

Surplus funds generated from a foreclosure can be a significant asset. It’s crucial to understand how these funds are handled and who is entitled to them.

What Are Surplus Funds?

When a property is foreclosed upon and the sale price exceeds the amount owed on the mortgage, the difference is known as “surplus funds.” Essentially, it’s the extra money left over after the bank gets paid.

Who Gets the Surplus Funds in Standard Foreclosures?

Even in standard foreclosures (non-estate cases), surplus funds can be a hidden asset. Here’s how they are typically distributed:

• Homeowner: If the property owner is alive, any surplus funds from the foreclosure sale generally belong to them after the mortgage and other liens are satisfied.
• Creditors: Similar to estate cases, creditors may have claims against the surplus funds. These must be resolved before the homeowner receives any remaining funds.

Navigating the Process

Claiming and distributing surplus funds involves navigating the court system. Although a court-appointed referee handles the foreclosure sale and initial distribution, claiming the surplus funds often requires legal action, including filing motions and dealing with competing claims from creditors or other parties. This process can be complex and requires careful attention to detail.

Don’t Leave Money on the Table

Surplus funds from foreclosures can be a valuable asset that you shouldn’t overlook. By understanding the process and knowing your rights, you can ensure you receive any funds you’re entitled to.