Foreclosure Article


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.

EXAMPLE:

$ 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.


Comments:

QUESTIONS

  • How do I find out if there is a sale date for my home that is in foreclosure?
  • If both parties names are on the house if one party stops paying am I responsible for all of it.
  • We own a unit in a condo complex that is being foreclosed upon as a whole. We need to know if we have any recourse for the loss of our investment and how this will affect our credit rating.
  • I am behind $8000.00 dollars on my mortgage. I know they will send a foreclosure notice soon. I have been struggling due to having a medical issue both my wife and myself (Heart Attack). Is there away to keep my home from foreclosure with a a program available to me? I am still working and my wife cannot find employment in Kingman as it is a small town.I have had to file ch-13 and I am still making payments to the court trustee monthly.
  • My house was due for a short sale. We had a buyer with good faith money down. The loan servicing company let the time frame lapse, did not respond to my realtor's requests, and sold the loan service subsidiary to Goldman Sachs the week after,and they took it to foreclosure. Now I have a lawyer for the HOA hounding me for $4000. The bank that owns my former property just listed it again for the price we ( my realtor and myself ) had it sold for originally. What do I do about the HOA problem? This was in Arizona. I am now living in Colorado.
  • My home which is worth 230,000 was sold in a trustee sale for 12,753.85. I found out the 1st trustee has the same last name as the company president of the company that bought the property. Before the sale a substitute trustee took over. I believe this sale was done with an Irregularity in conduct and an Inadequate sales price. What recourse do I have. Time is of the essence. No money for an attorney. Thanks
  • Can my wages be garnished after a foreclosure? ?
  • What is the actual process for evicting a homeowner after the property has been foreclosed, including timeframes?
  • My home went to foreclosure. The amount owed was $368,000 ,the bank set the opening bid at $302,000, The home sold for $371,000. Should the excess funds be the difference between $371,000 and $368,000 or between $371,000 and $302,000. Thx
  • Since 2010 I've lived at a home in mesa az. Recently my friend gave her home back to bank/ reverse mortgage and lien on it from IRS.She moved out to Missouri in july or first of aug 2013.I still am in the home whike she knew this she broke thru a window and hsrassed me.I called police they said she has a right to come in and change the locks.what legal rights do I have I pay utility bill at the resident.the mortgage company said it is in foreclosure so I need to know my rights

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