Surplus Funds

In depth

Surplus funds (also called overage or excess proceeds) arise when a foreclosure sale produces more than the debt and costs. State laws determine who claims the surplus, typically junior lienholders first and then the former owner. Misconception: surplus funds are not automatically paid out; the former owner often must file a claim, and statutes of limitation can extinguish unclaimed funds. Practically, in seller-financed deals where the seller forecloses, surplus funds may flow to the buyer (former equitable owner) if the property sells above the debt. Surplus funds recovery has become a service industry, with companies locating former owners and assisting with claims. Sellers and buyers should monitor foreclosure sale results and claim surplus funds promptly.