How to claim surplus funds from a foreclosure?
You may be entitled to some money after your home has been foreclosed on and sold in the open market. You can legally obtain surplus funds from the foreclosure when they are available. However, it is your obligation to claim these funds and pursue them. Even if the trustee sends you a check to your last known address, it may not be for the amount of money you deserve.
Wherever you go through the foreclosure process, you need to know your legal rights every step. From fighting the foreclosure to the methods the bank may use to sell your home, you need to understand that you still have some power in the situation, even if you feel helpless. Since it will be difficult for you to handle matters on your own, contacting a real estate lawyer should be a top priority. Your attorney can advocate for you throughout the process and ensure that the financial institution is following the law to the letter. You may even file a lawsuit against the bank if they break the law.
What Is a Foreclosure?
If you fail to make payments on a mortgage, a property can be subject to foreclosure. The lender must go through an entire legal process before they can take your property. The court must issue a foreclosure order after you have been given due process and the right to plead your case. It may be possible to stop the foreclosure if the bank is in the wrong or if there is a defect in the process. However, many homeowners either choose not to fight a foreclosure, or they may lose their challenge in court. At that point, the bank can take your home away from you. They have a collateral interest in your home and can exercise it when you do not make payments as required. They can sell your home to seek payment for the money you owe. However, the bank’s interest is limited to the amount you owe on your mortgage. Beyond that, you may still have some equity or value built up in the home, which is yours. The bank should not profit off your home to your loss.
You May Receive or Owe Money Based on the Sale Price of the Home
In many cases, the former homeowner will end up “upside down” after a foreclosure sale. The amount of money the bank receives from the sale of the home will result in a loss for the financial institution, and they have the right to recoup it from you. Foreclosure sales often result in ruined credit and long-term financial implications for families. The bank can obtain a judgment against you for future debt. They can garnish your earnings or even try to seize bank accounts, just like any other creditor. You may even consider filing for bankruptcy if you owe a large amount of money to the bank and other creditors.
Not all foreclosure sales lead to you owing money to the bank. In fact, some cases can lead to the opposite outcome. Your home might be sold at a time when there is a tight supply on the market. It might be located in a desirable area where many people want to buy. Since professionals purchase foreclosed homes as an investment, many might be trying to buy the property.
The point is that there might be a bidding war when the bank tries to sell your home, either through an agent or at an auction. The home might sell for more than you owe the bank, leading to surplus funds. For example, you may still owe the bank $200,000 on your mortgage, but your home sells for $300,000. After some fees and penalties may be deducted, that excess money is yours.
You Can Still Receive Money You Have in Your Home
Falling behind on your mortgage payments does not necessarily mean that you have surrendered all of the equity you have built up in your home to date. That still belongs to you, even if you no longer own your home. These are considered surplus funds, and claiming them is your legal right. The bank does not get to keep these funds. If you do not claim the surplus funds from foreclosure, they can be transferred to the state and put into an unclaimed property account.
Always Provide the Bank with Your Address
The bank usually has to send you a notice that there are surplus funds after a foreclosure sale, depending on the laws of your state. Typically, they must send this notice to your last known address, and it is up to you to claim these funds. However, the bank may not always do so. Then, the bank may not accurately report the amount of surplus funds because they may use different calculations. Never take the amount of money reported at face value because a bank has its own financial interests at heart.
Further, providing a new address to the lender is crucial, even if they have foreclosed on your property. Many people just want to leave the property and never deal with it again because they are embarrassed and traumatized by the foreclosure. However, the lender needs to have a way to contact you because this is how they will let you know that you may have money coming to you.
Stay on Top of Public Records to Learn About the Sale
With the help of a foreclosure attorney, you can search public records that show the amount of the property sale. A foreclosure attorney can run the numbers to see if the amount that the bank is reporting is accurate. You can challenge what the bank is reporting. You may even take legal action when there is a dispute about the amount of surplus funds available. However, you must be as informed as possible because the bank may not necessarily give you all the information you deserve, and it may not even be correct.
You May Fight with Other Creditors Over Your Surplus Funds
Even though there are surplus funds, it does not automatically mean you have the right to claim them. There may be other creditors who may make a claim against the surplus funds. You may have owed money to other people when your property was foreclosed. For example, there may have been a tax lien on your property or a contractor’s lien from people who performed work on your property. They are entitled to claim any surplus funds, and their right to the money can come ahead of yours. Still, a foreclosure attorney can review these claims and determine whether you can potentially fight for the surplus funds.
The Bank Must Have Used Reasonable Methods to Mitigate Your Losses
There is often a question about whether the bank has used reasonable methods to sell your home. When a financial institution makes a foreclosure sale, they are legally obligated to use certain methods. The bank will enlist a trustee to handle the foreclosure sale. The trustee owes fiduciary duties, and they must use reasonable care in selling the property. They cannot put their own interests ahead of others, such as selling the property to a related interest, where they profit at your expense. You can even take potential legal action against the trustee if they violated their fiduciary duties.
The bank cannot simply sell your home for any price it wants and then come after you for the balance. They must use loss mitigation measures, such as setting a minimum price for the sale based on the home’s appraised value. They can try to sell the home at an auction, where multiple bidders can drive up the price of the property. If the property does not sell at an auction, the bank should use an agent to list the property to seek the best possible price. If your home is worth more than you paid for it, or if you have built up equity in the property, the amount the bank recoups for the sale can be more than what you owe them.
It Is Not Always Easy to Get the Money You Are Owed
Claiming surplus foreclosure funds is not always easy, even though you still have legal rights. First, you must be mindful of the deadline to make your claim. Each state has different laws, and knowing how long you have to claim the money is crucial. If you miss the deadline, you can lose the right to claim the money entirely. Never expect the bank to act charitably in your favor because they have a financial interest in keeping this money. An experienced foreclosure attorney can keep track of the deadline so you do not miss it.
Then, you need to be mindful of the specific procedures in your state under the law. These procedures can be complicated, and the trustee may reject your request if you do not follow them closely. An experienced foreclosure attorney knows the law and the procedures you must follow. In many cases, claiming surplus funds is not as simple as sending a letter and getting your money. A fight may be necessary, and the trustee may not listen to you. They will be more inclined to take notice of your rights if you have a foreclosure lawyer dealing with them on your behalf.
Even though you may be in a difficult financial position, it does not mean that foreclosure has to ruin you. If there are excess funds available, they can be yours, but only after you go through a difficult legal process. It is always better to go through the foreclosure process with the help of an experienced attorney who can look out for your legal interests.
You may receive unsolicited offers of help from companies that claim to be experts in helping you claim surplus foreclosure funds. Be careful about who you choose to trust because many companies try to prey on desperate people in a time of crisis. Only trust a foreclosure lawyer, who has the fiduciary duty to act only in your interests and not theirs.
How a Foreclosure Lawyer Can Help You
You are already in a difficult enough financial situation without the bank or the trustee making matters worse for you. They may be banking on the fact that you are embarrassed and want to end a painful chapter in your life, and they may not entirely follow the law during the foreclosure or the sales process. The lender may think you can push you around because they have already convinced a judge to grant the foreclosure order.
It is critical to participate legally in all parts of the foreclosure process, no matter how difficult it is for you. There is a chance that you can negotiate with the bank to modify your mortgage and avoid a foreclosure entirely if it is in their financial interest to work with you. The bank may not be following the legal process in trying to foreclose, and you can put a stop to it in court when you have a foreclosure lawyer representing you.
Then, you need to remain engaged, as much as you want to start again and put the past behind you. A foreclosure attorney can monitor the situation and fight for every dollar you deserve if your home is sold for more than you owe the bank. A foreclosure attorney can negotiate with the trustee on your behalf, or they may file a lawsuit in court when you cannot reach a satisfactory resolution to your case.
Consult a Foreclosure Lawyer Now
You should never hesitate to seek professional legal help with a foreclosure at any stage of the process. Before the bank even files a foreclosure action, The Lopez Law Group might negotiate an alternative arrangement with your lender, such as a loan modification, to prevent a foreclosure and the sale of your home. If a case is already filed, they can defend against it however possible and ensure you receive any surplus funds you deserve.