A Silver Lining to Foreclosures: Obtaining Excess Proceeds from Property Sales

Although the real estate market has been in an upswing for several years and we are far past the great recession, there are still circumstances that can arise and cause people to lose their homes to foreclosure.  The only silver lining is that a property can sell for more than what is owed to the creditor who is foreclosing  

Once a note, secured by a deed of trust, goes into default, the lender will initiate foreclosure proceedings on the property.  The lender will notice the trustee sale.  If the property sells at the trustee sale for more than the debt owed on the deed of trust, the trustee will file a complaint in the superior court within 90 days of the sale and deposit the excess proceeds from that sale with the court.   Junior lienholders and other creditors may make claims against those proceeds.  Any person with a recorded or other legal interest in the property at the time of the sale may apply for the release of the proceeds by filing an application for distribution in the civil action that was filed by the trustee pursuant to the statute.  But if there was not a second mortgage or other debt obligation with a lien against the property, the former property owner can file an application with the Court to release those proceeds to the former owner.  The former property owner could also oppose the claims if they believe them to be wrongful.  The procedures to apply for the money held by the court is laid out in the Arizona Revised Statutes under A.R.S. §33-812.  These monies are known as “excess proceeds.”  Although the process is not very easily accomplished there are documents to assist a claimant on the Superior Court website to allow a claimant to make application.  There can be complications involved in trying to collect the funds and you should consult with an attorney to discuss how to go about pursing the application process. 

In the case of a judicial foreclosure through a sheriff’s sale, the procedure is different and regulated under a different statute (A.R.S. §12-1562).  This process can also have complications and having an attorney assist in navigating the process could save significant time in trying to obtain the funds.

People who may have a claim for money in excess of the sale should be careful when receiving calls from companies and individuals who attempt to buy the interest or enter into some contractual agreement to obtain the funds on their behalf.  The statute specifically limits the amount of money a third party can charge for handling the process on the former property owners’ behalf.  The payment is limited to $2,500.00 plus attorney fees and costs.  Our firm has represented clients who have received solicitations from these third parties and found that the third parties may use aggressive and threatening tactics to rip off the former property owners.  

Former property owners can go to the County Treasurer’s website and find a list of properties for which the County Treasurer is holding excess proceeds as a result of the trustee sale.  If the funds are not claimed within two years of being deposited the money will go into the County’s general fund.

The attorneys at Parker Schwartz PLLC have the experience necessary to navigate this process successfully.  Please call our office to discuss any interest you may have in an excess proceeds matter.  

Robert R. Northrop is an attorney at Parker Schwartz, PLLC and focuses his practice in Real Estate and Commercial Litigation. He can be reached by phone at 602-282-0469 and by email at RNorthrop@psazlaw.com

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