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.
I was informed of trustee sale to take place 06/2008 on my home in Florence, AZ. My Husband and I decided it was best to vacate the home with our family before the sale. We filed Chapter 7 Bankruptcy in 2011 and included the home and HOA. We received a letter from an attorney, suing us for HOA dues, post bankruptcy. Wouldn't it already be considered foreclosed from the notified date of sale, even if it was postponed?
CAN A BANK FORCLOSE A HOME IN THE STATE OF ARIZONA WITH THERE BEING NO CHAIN OF CORPORATE TITLE TRANSFER?
I filed for ch. 7 bankruptcy and my debts were discharged on June 2011. To this date I'm badly behind on my house payments, and my lender offers me a reduced monthly payment of $350. The problem is that my lender does not want to make any promises in writing and does not give me straight answers on what happens if I keep my end of the deal. I'm affraid my lender will simply foreclose when it may fit its interest, disregard of my needs. Also, it is wise to enter into any deals post bankruptcy if my debts are discharded already and thus, uncollectable? Thanks!
There is a scam going on with my house and reference for foreclosure need legal assistance ASAP I am disabled and need help my phone number is I need immediate help. 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?
I have a 3plex in AZ that is about to go into foreclosure. I was told by an Attorney that if the lender does not come after us with in 90 days of the foreclosure date by law they cannot come after us in other words sue us. Is this true?
my home had a foreclosure hearing in November but today i received a letter saying. Motion to withdraw motion for summary and default judgement entry and decree of foreclosure and vacate hearing. what does this mean? Thank you in advance for your time
The home we are renting is set to go to Trustee Auction at the end of this month. The "Protecting Tenants at Foreclosure Act" expired 12/31/2014. What are my rights as a tenant now that this has expired. Can I be evicted without notice..do I still have to receive ample notice if the new owner wishes to occupy the home?
I ended up in a rescue scam for foreclosure. I paid money to a mortgage company to help me and they did nothing. I have now lost my home and want to know what I can do to get my money back frome the rescue scam.
When does a foreclosure come off a credit report? Seven years from the date the loan went into foreclosure, from the date of last payment or from the date of the sale at auction?
- Let us know how we are doing! Please take a couple of minutes to fill out our survey.
- 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