What is Mortgage Foreclosure Surplus?

by admin on September 13, 2010

Question:

What is Mortgage Foreclosure Surplus?

Answer:

The occurrence of a foreclosure surplus is rare, but not impossible. During the foreclosure sale, the house or property is sold to the public through auction. In this event, the person or party who gives the highest bid gets the property. If the winning bid is higher than the mortgaged amount, the overage or the excess is referred to as a mortgage surplus. This surplus amount is distributed to certain parties in order of priority. The first claim to any mortgage surplus goes to past due state property taxes.

The state can place a tax lien on the property which is usually up to the day of the sheriff’s sale or auction. If the sale of the property is a part of a bankruptcy case, the creditors who have received judgments from the previous owners can claim a part of the surplus amount. The trustee of the bankruptcy is the one who determines the amount which the creditors are entitled to receive. If the former owners owed taxes, the IRS can also attach a lien on any mortgage surplus. If the owed debt is too high, the IRS can even claim ownership of the property, irregardless of the highest amount of bid. If all parties, lien holders and creditors have been paid and there are still monies left, the remainder is given to the previous owner.

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