Foreclosure Auctions Explained: What Happens to Your Home’s Equity?

A foreclosure auction marks the end of homeownership, but it doesn’t necessarily mean losing everything. If the property sells for more than what was owed, the homeowner may be entitled to surplus funds.

Key Takeaways

Foreclosure auctions aim to satisfy debts, with surplus funds returned to the homeowner.
The sale price does not always reflect market value.
Acting quickly after a foreclosure is key to surplus funds recovery.

What Happens to Sale Proceeds

Debts Paid First: Mortgage balance, unpaid taxes, and liens get paid from the sale proceeds.
Surplus Funds: Anything left over is held by the court trustee, or county.
Claim Process: Homeowners (or heirs) must actively file a claim to recover the funds.

Example: If your home sells for $375,000 and your mortgage payoff was $300,000, the remaining $75,000 is surplus funds—money that belongs to you.

Who Can Claim Surplus Funds?

Surplus funds are generally owed to the individual(s) who owned the property prior to foreclosure. However, the eligibility to claim can depend on factors like:

Ownership: Were you the titled owner at the time of foreclosure?
Heirs: If the original owner has passed away, heirs may be eligible.
Legal Disputes: Complications may arise if there are disputes or additional claims on the funds.

Why Sale Prices May Be Lower than Market Value

Foreclosure auctions often attract investors looking for deals, so properties may sell for less than they would in a traditional sale. However, even a discounted sale can generate surplus funds if the mortgage balance was relatively low.

Need help understanding your auction outcome? Contact us for a free case review.

The Importance of Fast Action

Time limits apply to surplus funds claims. Waiting too long can result in forfeiting your money. Working with a professional team ensures you meet all deadlines and maximize your recovery.