Getting Paid After Foreclosure: Surplus Funds
The residential or commercial foreclosure process is never an easy one for property owners. At Holmquist + Gardiner we help property owners understand their rights during a foreclosure process.
What most people do not know about the foreclosure process is that if there is money left over from the sale of a property in foreclosure and after satisfying debt claims, those funds may be eligible to go back to the prior owner.
The Process
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 legal 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.
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 legal counsel to help you with this process. This is especially true if there is a unique ownership structure or multiple liens on the property. Legal 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.
Know Your Rights to Surplus Funds
The foreclosure process is difficult for property owners. Losing your home or commercial location is not something that has a lot of upside. But, knowing you might have access to surplus funds from the foreclosure is something that you should fight for to help as you move forward and past the foreclosure.
Make sure that as you go through the foreclosure process you carefully review and understand your documents so you can be clear on if you might be eligible for surplus funds. This is money that you are rightfully owed.
Have questions about surplus funds from foreclosures? The attorneys at Holmquist + Gardiner specialize in real estate law and are available to answer any questions you might have. Contact us today.
