Recovering Excess Proceeds After Foreclosure of Your Home
In Arizona, a home is typically foreclosed through a process known as a Trustee Sale. A Trustee’s Sale is when an individual or firm (the Trustee) holds an auction to sell the home in an attempt to recover the balance owed to the foreclosing lender.
During the downturn in the real estate market, the purchase price at auction was typically at or less than the loan balance owed to the lender. However, with the recent upturn in the real estate market, we are now seeing purchase prices that are over the amount owed to the foreclosing lender. The amount by which the purchase price at auction exceeds the balance owed the foreclosing lender is known as Excess Proceeds.
$ 135,000 Price the property sold for at Trustee Sale auction
- 100,000 Loan balance amount owed to foreclosing lender at time of auction
$ 35,000 Excess Proceeds
In the above example, $100,000 from the sale proceeds goes to pay the amount owed to the foreclosing lender. The question is who is entitled to the remaining $35,000 in Excess Proceeds? Generally, the Excess Proceeds first go to junior voluntary lienholders and then to the homeowner whose home was foreclosed.
Voluntary lienholders are lenders to whom the homeowner voluntarily gives an interest in the home. Two common examples are your mortgage company (both your primary home loan and your secondary home equity loan) and a homeowner’s association (a junior voluntary lienholder). By signing the mortgage, you voluntarily give the lender an interest in your home; and by purchasing a home within a community development you voluntarily give the homeowner’s association an interest in your home.
Involuntary lienholders are creditors who sue to get a judgment against you. A common example is a credit card company that sues, gets a judgment against you for the amount owed on the credit card, and then records that judgment as a lien against your home.
Let’s add a few facts to the example above. In addition to the $100,000 loan being foreclosed, there is a 2nd mortgage for $20,000 and a credit card judgment lien of $20,000. Under this scenario, $100,000 goes to pay the amount owed to the foreclosing lender, with the $35,000 in Excess Proceeds being distributed as follows: $20,000 to the 2nd mortgage (junior voluntary lienholder) and $15,000 to the homeowner. The credit card company (involuntary lienholder) gets nothing.
So how does the foreclosed homeowner know if there are Excess Proceeds available? The Trustee is required to mail a notice to the homeowner’s last known address. The problem is the last known address is usually the foreclosed property, which the homeowner has vacated without providing a forwarding address.
The homeowner, armed with the knowledge that a Trustee Sale can generate Excess Proceeds, should track the Trustee Sale process. Call the Trustee’s office the day after the sale is scheduled to take place. Ask the Trustee’s office if the sale was postponed (note: the Trustee is not required to provide you written notice of the postponement) or completed? If the Trustee’s sale was postponed, ask the Trustee’s office for the new sale date. If the Trustee’s sale was completed, ask: Are there Excess Proceeds from the sale? When will the Trustee be depositing the proceeds with the county treasurer and filing the required lawsuit? Inform the Trustee that you are the foreclosed homeowner and want to make a claim for the Excess Proceeds. Provide the Trustee with your new address and send a confirming letter (by both certified mail/return receipt requested and regular mail) to the Trustee with your new address and contact information.
Excess proceeds can remain on deposit with the county treasurer for up to 2 years. Certain deadlines begin to run when the Trustee deposits the Excess Proceeds and files the lawsuit. Upon receiving notice that the lawsuit has been filed, you should immediately contact one of the legal aid offices listed below for free legal help in recovering Excess Proceeds.
You can apply online for free legal help here or click here for a directory of legal assistance in Arizona.
This article provides general information about Excess Proceeds. It does not address your specific factual circumstances and should not be relied on as legal advice. Please contact an attorney for legal advice specific to your situation.
As a renter in a property that is going up for sale on 4-22-08, how long do I have to move and find a place to live? The owner will not return my phone calls or my money?
I am in foreclosure with Citimortgage. I just started working after eight months. I have kept in touch with them, and they will do a hardship application when I can provide two paystubs. This I can do as of two weeks from today, when I get my second pay stub. Unfortunately, they are proceeding with foreclosure. I cannot afford an attorney. I just need someone to make them wait the extra two weeks, plus however long they take to process my application. Without my house I am literally homeless, and I am so close to giving them what they need. Can you provide me with pro bono assistance?
House is being foreclosed on. There is a second mortgage involved. What is the statue of limitations for the second mortgage to file a deficiency law suit? Is it 90 days after the sale of trust of the 1st mortgage foreclosure? Or does it fall under the 6 year rule?
My father passed away in September, 2016. I am the executor of his estate and I have a lawyer representing me and the estate. His house is paid off but he has a 7,000 home equity line of credit. There is no money in the estate to pay any bills except the utilities. It is for sale and hopefully will be sold soon. I received an Act 91 notice. Can a house be foreclosed on that is in probate? There is no money to pay the home equity line of credit bill or the taxes owed till the house is sold
I'm renting a home for the last 7-8 years ,and now I found out its going into foreclosure .Do I still need to pay rent,and would like to know what my options are thank you.
In 2003 I losa a home to foreclosure.There was over 40,000 of equity in my home. After all debts & liens were paid off,10,000 in excess proceeds was put with the State Treasury of Arizona.How do I go about getting my money back from them?
I just found out the house I'm renting is in foreclosure. My daughter is attending school in the area too. Do I have any rights or am I just stick waiting to see what happens? Do I pay rent? Thank You!
I am filing a foreclosure on an agreement for sale because of non payment for 5 months. Do I need to send a letter of intent to foreclosure and wait 60 days before filing with the court?
We just received notice that our house was sold to a new trustee And it’s due to be auctioned in April. With the new trustee allow us to double our payments to make up for past due until it’s current to keep it from being auctioned off
MY HOUSE IS IN FORECLOSURE NOW, WITH A SALE DATE OF NOV 13. CAN I DECLARE BANKRUPTCY AND KEEP MY HOUSE?
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