Coronavirus: How will Covid-19 Impact your Florida Mortgage Payments? Learn More!

Florida Foreclosure Sale Surplus Funds – Who is Entitled to the Surplus Funds if Not the Former Owner?

After the foreclosure sale of a home in Florida, there may be surplus funds remaining. This happens when, for example, the amount owed on a foreclosed property is $100,000 and the bidding at the foreclosure auction goes up to $150,000. This means the winner of the property at the auction bid $50,000 over what was owed to the plaintiff in the foreclosure case. This is now surplus. Who is entitled to those Florida Foreclosure Sale Surplus Funds? Generally speaking, the former owner of the property is entitled to those funds, but there are a few exceptions.

Florida Statute 45.033(1) states, “there is established a rebuttable presumption that the owner of record of real property on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim.” This means that the former owner is the person who gets the Florida Foreclosure Sale Surplus Funds after any subordinate lienholders who have timely made a claim. A subordinate lienholder, according to Florida Statute 45.032(1)(b) is, “the holder of a subordinate lien shown on the face of the pleadings as an encumbrance on the property”. “Subordinate” means lower in rank or position. This means that in the case of a foreclosure sale where the plaintiff was a homeowner’s association, a mortgage lienholder is NOT subordinate and cannot receive the Florida Foreclosure Sale Surplus Funds.

A mortgage lien is superior to that of most other liens and if there are surplus funds from a foreclosure sale by a homeowner’s or condo owner’s association, the mortgage lienholder cannot receive any surplus funds to pay down their lien. Consequently, this means that the person purchasing the property at the foreclosure auction would take title to the property subject to the surviving superior lien. Additionally, this third-party purchaser who now owns the property is neither the former owner, nor are they a subordinate lienholder and they have no right to the Florida Foreclosure Sale Surplus Funds.

So who would be entitled to those Florida Foreclosure Sale Surplus Funds? Florida Statute 45.032(1)(b) further states, “A subordinate lienholder includes, but is not limited to, a subordinate mortgage, judgment, tax warrant, assessment lien, or construction lien.” Often times the court may require an evidentiary hearing to determine who is subordinate and who has a superior lien to that of the foreclosing lienholder. The courts will generally not entertain any arguments by a third-party purchaser at this evidentiary hearing because they are not actually a party to the foreclosure case and have no say, by Florida Statute or caselaw, as to where the Florida Foreclosure Sale Surplus Funds are to go. The court will decide what lienholders are subordinate and it what order they are to be paid from the surplus.

What happens if the former owner of the property is deceased? Florida statute 45.033(2)(b) states, “An involuntary transfer or assignment may be as a result of inheritance or as a result of the appointment of a guardian.” This means that if a relative of yours died and their property went to foreclosure sale, you as an heir could be entitled to the Florida Foreclosure Sale Surplus Funds. Much of this depends on whether the person left a will or died intestate. If there was a will and specific persons were named to receive the deceased party’s property, the will must be probated, and the Florida Foreclosure Sale Surplus Funds will be distributed according to the testator’s wishes.

If there is no will, then any remaining Florida Foreclosure Sale Surplus Funds (if any) would go to all heirs “per stirpes”. If the person is married and the surviving spouse is also on the deed to the property, he/she will usually receive all of the funds. If the spouse is also deceased, the funds would then go to their children. If they had no children, then to their parents. If their parents are also deceased, then it goes to the deceased party’s siblings and to the siblings’ children, etc. If there are no heirs at all, or no one makes a claim after a year, the Florida Foreclosure Sale Surplus Funds will escheat to the State of Florida where they will be used for the school system.

This can be a very complicated process and I always recommend that you hire a qualified Florida Foreclosure Sale Surplus or Florida Tax Deed Sale Surplus attorney to represent you and make sure you get the most of the funds you have coming to you. You won’t get the same kind of service and knowledge if you sign your rights over to a surplus recovery company. Please give me a call for a free consultation. I handle Foreclosure Sale Surplus and Tax Deed Sale Surplus Funds in every County in the State of Florida and I don’t get paid unless you do.

Categories: