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.
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.
we are currently listed as owner's to a mortgage but signed transfer of property- deed papers to an investor of whom we have been making monthly payments to. We have been informed by the mortgage that our payments have not been submitted and that we will soon be in foreclosure. What can we do? This investor promised to assume the mortage as well as the property but really only filed tranfer of property and continues to collect our money, of which has been steady each month.
I own 2 properties, if I let one go into foreclosure and reside in the other property can the bank readjust my mortgage that is not in foreclosure?
I was in the midst of a loan modification review and was told they granted me a 30 day extension on my foreclosure. I have now come to find out they never did the 30day extension and my house was sold. Do I have any legal recourse?
CAN A BANK FORCLOSE A HOME IN THE STATE OF ARIZONA WITH THERE BEING NO CHAIN OF CORPORATE TITLE TRANSFER?
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?
Is the law the same re foreclosure the same for a mobile home? I have vacated the property. Can my wages be garnished?
Can my wages be garnished after a foreclosure? ?
We recently (7/29/14) lost our home to foreclosure, the question I have is that when we initially bought our home in Oct. 2004 the purchase price was $125,500.00 with a 3 yr arm. we then refinanced to get a fixed interest rate and got some cash to pay off debt, the refi amt was $171,000.00 that was about 5 or 6 yrs ago and now fast forward to 2014 I get a statement from the bank saying we owe $224,600+ thousand dollars on the home, how does my debt increase to that amount and is this legal?
My father took out a reverse mortgage. The house appraised @ $320k, they wrote him a line of credit for $425. Thankfully he didn't use all of this money. Is this considered preditory?
I own a note on a mobile home located in Tucson, AZ. The buyers are behind on their payments. How do i evict them since it is not rent.
- Please select your county of residence below.
State Bar of Arizona
Maricopa County Bar
Referral number 602-257-4434
Pima County Bar
Referral number 520-623-4625
National Domestic Violence Hotline
Bankruptcy Court Self Help Center
Certified Legal Document Preparer Program