(MCT)—Q: We had an investment property that fell into foreclosure a few years ago. It finally went to auction and was bought by a third party for about $20,000 more than what we owed the lender. Who gets that money? — Liz
A: You do — provided that you did not have a second mortgage or other liens. When your mortgage lender sues you for not paying your mortgage, it is trying to get repaid, and your house gets sold only in an attempt to collect on the loan.
The money generated by the foreclosure sale is used to pay your various household creditors in their order of priority. This means that the money will go to, in order, your first mortgage, community association, second mortgage, any other liens from oldest to newest, and then, finally, you. Any money left over is a surplus.
State law and the final judgment in foreclosure cases will set forth the procedure that claims must be made against the surplus. All interested parties have 60 days from the clerk issuing its certificate of disbursements to file a claim with the court. If more than one claimant steps forward, the judge will have a hearing to decide who gets the money. Make sure to timely file your claim.
Because of recent home price increases, properties are being sold at foreclosure for more than the judgment. People who lose their homes to lenders tend to ignore the whole process, but doing so can sometimes cost them money.
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar.
©2014 Sun Sentinel (Fort Lauderdale, Fla.)
Distributed by MCT Information Services