Surplus funds, also referred to as overage or excess funds, are the funds remaining after a mortgage is paid through the final judgment of a foreclosure auction.

The trustee appointed in the foreclosure auction is responsible for disbursing the funds without charging additional fees.

2. I believe I am entitled to surplus funds. What do I do ?

If you owned the home prior to the foreclosure and believe you may be entitled to surplus funds, you should communicate with the trustee soon after the auction takes place.

The trustee contact information can be found on the Notice of Trustee Sale. A
copy of this notice may be retrieved from the local recorder office if needed.

Who else gets paid before I can access surplus funds ?

Junior lienholders are paid in their order of seniority before the prior homeowner(s) can receive any remaining monies.

Prior homeowners can dispute lienholders in court. The trustee turns over the funds to the court if a complaint is filed.

3. How much time do I have to claim surplus funds ?

Trustees have 30 days from the auction to notify all interested parties (such as second mortgage holders, tax lien holders, or credit card lien holders) of the possible surplus funds via mail.

Interested parties (including you) have 30 days from the notification to assert their claim. Failure to respond within the 30-day deadline can result in losing rights to funds.

Do I have to pay someone to collect surplus funds for me?

No. The trustee appointed in the foreclosure auction is responsible for disbursing surplus funds without charging additional fees.

The foreclosure process is public information. Anyone reviewing the public notices will know if there are surplus funds. People who may be operating illegally sometimes reach out to prior homeowners and charge unreasonable fees for collecting surplus funds.

If you receive one of these inquiries, you should conduct your own investigation to confirm if the individual contacting you is licensed to conduct such business.

4. What is the Process to claim surplus funds ?

If a surplus exists after the property is sold, the financial institution or lienholder managing the foreclosure is not eligible to hold onto any extra funds after their debt and foreclosure costs are paid. The proper course of action is for the surplus to be deposited into a court registry.

Once that is done, a notice is put out to all possibly interested parties on the property. The notice will be included within a large packet of documents and will be delivered by certified mail after the foreclosure sale. This large stack of papers documents how the Surplus Funds procedures of foreclosure were followed. Within the documents is a Notice of Deposit of Surplus Funds, which details the amount of funds that are left over and discusses how parties that could have a claim to the funds should make themselves known to the court.

It’s important to not ignore this packet, as it’s your key to securing any possible surplus funds.

5. How to Obtain Surplus Funds ?

Once you’ve received the Notice of Deposit of Surplus Funds you will need to file a motion with the court of jurisdiction to disperse the funds. This motion is generally straightforward and demonstrates that the individual filing the motion is the owner of the property OR the individual filing has a lien against the property and they take priority over others staking any claim to the surplus funds.

Though the motion is not overly complicated, the determination of priority can often be more complicated. This is why we recommend hiring Surplus Funds counsel to help you with this process. This is especially true if there is a unique ownership structure or multiple liens on the property. Surplus Funds counsel can do a review of title and help show who has priority and in what order.

Generally, the priority starts with the first mortgage and then moves on to any second/third mortgages and finally to any liens from contractors or other trades that have done work on the property or judgments from the court. The homeowner is then at the bottom of that pile.

Once all of the interested parties have submitted a motion, they are reviewed by the court and, if needed, parties are asked to file responses or appear at a hearing on the matter. The court then determines who has priority to the funds and will award the funds to satisfy the obligation of the party “first-in-line”. Of course, if that party is the prior owner, they will be awarded all remaining surplus funds.

If no one moves the court for a disbursement of the surplus funds, then, after a second notice to parties, the court will deem the funds abandoned and send it to the Washington State Department of Revenue.

Here’s an example of how it works:

Let’s say you owed $100,000 on your mortgage, and it sold at a foreclosure sale for $175,000. Who is entitled to that $75,000 of extra money, aka the Foreclosure Surplus Funds? Read on to find out!

Homeowners May Still Benefit from Surplus Funds if They’ve Already Sold

Florida law says that there is an established rebuttable Surplus Funds presumption that the owner of record (the former Homeowner), on the date of the filing of a lis pendens, is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim.

If there are any liens or second mortgages, they may be entitled to some of the surplus funds. However, if any of these liens fail to properly follow Florida law, they may be blocked from receiving any amount of money, and the homeowner may be able to collect every single dime.

How do I know this? Because I have helped homeowners collect surplus funds even when there were second liens, whether it be a second mortgage, government lien, or a municipal lien.

Even if there are no second liens, a homeowner collecting surplus funds is a technical procedure. Missing a deadline or an improper filing may lose the former homeowner the ability to collect a plethora of money.