Excess Proceeds of Trustee Sale - Posted by Dieseldan

Real Estate Investing Real Estate Law
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Posted by Rick, the Probate Guy on March 22, 2007 at 10:52:53:

I agree with Max’s lament about taking on a challenge when you are essentially unprepared. That said, I think that you’ll find statutes in the same place as the statutes relating to non-judicial foreclosures in your state (Alaska).

In California, non-judicial foreclosure sales are primarily convered by Civil Code Section 2924 and treatment of surplus funds in 2924 J & K.

You can probably find the corresponding statutes via your state’s Bar association, legal research library, or anywhere else that posts or reveals state law.

While I don’t know this as anything like a fact, I’m bet that the statutes are pretty similar to California’s.

Here, when the statutory notices are mailed to persons entitled to noticing per the trustee’s sale guarantee, the foreclosing trustee must be certain that there are no conflicting claims for surpluses or else they typically refer the file (and the money) to a another attorney who interpleads the funds with the local Superior court, letting the judge worry about who is entitled to the money.

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Excess Proceeds of Trustee Sale - Posted by Dieseldan

Posted by Dieseldan on March 21, 2007 at 02:27:59:

I will be serving as the Trustee for a friend in a Deed of Trust (nonjudicial) foreclosure of a seller-carryback note here in Alaska. To prepare for this task I have researched the statutes and case law concerning default notices, conduct of a Trustee’s Sale, recording a Trustee’s deed, etc. The nonjudicial foreclosure process and my duties as a Trustee are straight forward, except for one important missing detail:

I am unable to find any legal direction regarding the duties of a foreclosing Trustee for the safeguarding and distribution of excess proceeds (also known as surplus funds) which are collected as the result of bidding that exceeds the opening bid at the Trustee sale (the Beneficiary’s offset bid).

I have made some low-key inquiries to title companies that and real estate attorneys that function as Trustees. I asked them how they customarily handle excess sale proceeds. And I came to learn that this is a sensitive topic - one which insiders in the “Trustee business” do not wish to discuss with “outsiders” such as myself. They seem to get real vague and defensive when asked how they handle the distribution of excess proceeds. The clerks say they do as directed by the attorney. The attorney says come and hire me, because I’ve trained and practiced many years to handle these highly technical matters, that can’t be discussed candidly on the phone as a “fellow Trustee.” Yeah . . . Right! Do you suppose these businesses might just keep those excess funds growing in their trust accounts into perpetuity if not rightly and timely claimed? So here I am, seeking my answer from you folks - and expecting to strike out once again here. I sure would be tickled if it wasn’t so - ;O)

My review of the Alaska statutes did turn up AS 09.35.110, which directs the return of excess proceeds to a judgment debtor in a JUDGMENT EXECUTION. No help here - this doesn’t apply to Trustee sales.

Also, AS 29.45.480. directs that excess proceeds of a tax foreclosure sale may be returned to the former record property owner upon presentation of a proper claim (after subtracting authorized amounts for unpaid taxes, penalties, interest, costs to the municipality of foreclosing and selling the property, and costs to the municipality of maintaining and managing the property before the tax sale). This is closer to what I was hoping to find for - but still inapplicable to Trustee sales.

So . . . there seems to be no published guidance that tells Trustees how to handle and distribute the excess sale proceeds raised at Trustee sales. Can any forum members point me to Alaska case law or statutes that clarify procedures for this process?

There seems to be such a huge void in the law here (and an equally huge potential for abuse and misapplication of excess proceeds) that one could drive a Mack truck through it. If you can’t help with my Alaska question, how are excess proceeds handled in your own state? . . . And would you please cite your own state’s excess proceeds (surplus funds) statutes?

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Re: Excess Proceeds of Trustee Sale - Posted by Bill H

Posted by Bill H on March 23, 2007 at 15:19:52:

Just what is the problem? Your friend should hire an expereinced attorney to do this. All the costs and fees are added into the foreclosure process and repaid as a result of the sale.

This area is fraught with problems…and title insurance after the sale will be one without proper foreclosure proceeding being followed.

Another is to be absolutely certain that ALL interested parties are properly notified.

Hire an experienced attorney, sell, pay off all costs, have him disburse the exesss, if any, and be happy.

Good Luck,
Bill H

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Re: Excess Proceeds of Trustee Sale - Posted by Natalie-VA

Posted by Natalie-VA on March 22, 2007 at 10:48:47:

I’m with Max…your friend should hire an experienced foreclosure attorney. It might be considered unauthorized practice of law to do this for him if you’re not an attorney. I really don’t know. I’ve been to many trustee sales where the person conducting the sale was not an attorney, but their firm had attorneys on staff. Does anyone know if you need a law license to do this?

–Natalie

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Re: Excess Proceeds of Trustee Sale - Posted by Max-Va

Posted by Max-Va on March 21, 2007 at 20:51:44:

I am no lawyer and these are my opinions and should not be considered fact or advise.

That said a foreclosing lender is due the amount owed plus late fees and accrued interest plus foreclosing costs. Any amount recieved from the sale of the property above this belongs to the owner of record prior to the sale.

Why did you agree to handle this instead of compentant legal help that deals with this often? I believe that if it is not done correctly you will not be able to delivery a clean and insurable title.
Get some compentent legal help NOW