How to Claim Surplus Funds From Foreclosure

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Foreclosure is a legal process used by lenders to help them recover money owed to them through mortgages when the borrower cannot make the payments. The lender will recover the money by taking control of the house and selling it.

If you’re also thinking, “I’m selling my house for cash.” You can look for home buying companies.

In most cases, it is done by auction. Lenders are permitted to do this since mortgages are secured loans with the house being the collateral. However, the process of foreclosure may differ depending on the state.


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The Meaning of Surplus Funds

Sometimes during foreclosure, your property might sell for less than what you owed in the mortgage. The remaining unpaid portion is known as a deficiency. Some lenders may sue you to get a deficiency judgment from a court of law depending on the state.

The judgment will demand that you pay the balance to the lender. The lender can choose to set off your wages or levy your bank account if you don’t pay. Such a move only happens depending on the state in which the application is made.

There are two types of foreclosure: nonjudicial and judicial foreclosure. In a nonjudicial, the lender seeks the services of a foreclosure trustee who takes care of the whole process. In a judicial foreclosure, the court carries out the process. In both cases, you have the right to have the contact information of the trustee or officer selling the property.

Surplus funds are the funds that remain after the mortgage has been paid through the last judgment of a foreclosure auction. The excess funds are held by a trustee or deposited with the court. The main duty of the trustee is to disburse the funds without charging any other fee.

The trustee is supposed to send a notice of the surplus to your last known address. In case you do not receive such notice on time, you should contact the number that appeared on your previous notices.

The surplus funds from foreclosure are calculated by subtracting the loan balance and the costs incurred during the foreclosure process from the total proceeds of the sale. In case there are junior liens, they will be paid first, and you can get whatever funds that might remain.

home for sale foreclosure

How Do You Claim the Surplus Funds?

Any excess proceeds from a foreclosure sale are held by a trustee or deposited with the court. You have an opportunity to legally claim these funds. 

Since scams exist, you must be careful when following up on the surplus proceeds. In case something does not feel right, contact the trustee or officer.


You will have to take quick action to recover the surplus proceeds from the foreclosure. The window of opportunity to claim the surplus fund from foreclosure is limited. 

You are required to provide proof of prior ownership to the trustee and hand in a claim form that is carefully filled in or attend a court hearing. Failure to take these actions on time may lead to the court treating the surplus funds as unclaimed property.


If you were the owner of the home before the foreclosure and think you are entitled to receive surplus funds from the foreclosure, you need to bring this to the attention of the trustee immediately after the auction. All the trustee’s contact information is available on the Notice of Trustee sale.

Important Facts to Note When Claiming Surplus Funds From a Foreclosure

Excess Proceeds Can Be Obtained After a Foreclosure Sale

Any excess proceeds acquired by a foreclosing agent in place of the mortgage note holder, if available, will be situated at the county’s superior court where the foreclosure happened.

A notice will be sent to any interested parties, including the previous owner, informing them of the proceeds and claiming the excess money if they feel they are entitled. 

If you changed your address, chances are high that you will not receive this notification, and it will be up to you to follow up with the foreclosure trustee to determine whether there is any excess money.

Obtaining Surplus Proceeds for a Foreclosure Sale Demands a Court Order

After determining that surplus money is available after a foreclosure sale either through the trustee, the court where the house is located, or through the mail, you should ask for legal advice from a professional if you don’t want to tackle the process alone.

You can’t just go to court and demand the funds. After the surplus money has been deposited with the court, all interested parties will make their claims in a specific order. If the surplus funds remain after all the subordinate lienholders have been paid, the owner on record can assert a claim for the surplus proceeds at the time of the sale.

A request for the disbursement of the excess proceeds can be made at any time after the foreclosure trustee sale and after giving notice for twenty days. The request will be through a motion that has been written and the proceedings done in the court located in the county where the surplus proceeds were kept.

Avoid Hiring a Company Outside of Colorado to Help You Obtain Surplus Money

You might not be aware that you have surplus proceeds after the home is sold during foreclosure in your state because you moved or otherwise. You may get a letter at a later date informing you of the accessibility of the surplus proceeds owed to you.

These letters may originate from companies or individuals with no legal training claiming they can locate these funds and distribute them to you at a fee.

Such companies can be predatory and may not be conversant with the laws of your state concerning surplus proceeds owed to you from a foreclosure sale. It is not advisable to sign over your rights for these funds before seeking legal advice from an attorney in your state.

Any Person Is Permitted to File a Motion to Get the Surplus Money

After your home has been foreclosed upon due to trustee sale and the surplus funds have been deposited, any person, yourself included, can claim the surplus funds.

However, any person making a claim must also file a motion seeking a court order to turn over the proceeds and explain why they think they are entitled to the proceeds. If they don’t have supporting documentation as to why they should receive the funds, a judge may disqualify that motion, and no order will be granted.

It Takes 30-45 Days to Obtain Surplus Money

If you act fast, it will take 30-45 days to have the excess money in your hands. However, sometimes it can take months after a foreclosure for the trustee to deposit the funds with the court and end their involvement with the case.

You can file a motion immediately after the funds have been deposited, but you need to give other parties a notice for twenty days to make claims in case they have any. The judge will sign a court order releasing the funds if your claim is undisputed and you have all the required documentation.

As a property owner, you might get nothing after a foreclosure auction. This is because the main aim of a foreclosure auction is to recover owed money. You may also not be aware that you have surplus funds for selling real property.

To avoid such a loss, you may consider selling the property before it is auctioned to real estate companies that buy real property as is like a cash home buyer. They don’t have a lot of requirements before buying your property, and you can avoid losing the house to a tax sale and being issued a tax deed.             


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