Foreclosure Surplus funds?

24 Replies

Hi everyone, I recently heard about a method some investors are using. It involves attending foreclosure auctions and identifying any properties that sell for a surplus over the mortgage, lien and junior liens. This amount is due back to the original homeowner, but many times they never know this money is theres and never receive it. The idea is to find these people and charge them a percentage of the surplus or an agreed amount. This sounds pretty interesting to me and was wondering if anyone has any experience in this.

Also, I went to the local county court house, to find out when the next auction was. I asked somebody and they told me to look at a sign and there were a couple of notices, but Is there a better way to find how much is owed on the mortgage and dates of auctions in a more organized fashion? Thanks for any help!!

Sounds like a lot of work. Can you make enough to make it worth it?

I have seen alot of threads on this subject recently. I suspect that this is the "next best thing" in the guru field.

Normally the guru will make more from charging you for his information than you will by doing what he says you can do.

While what they say can be done IF done properly, and some money made, it is rare to find many situations steadily enough to make a good living.

Can it be done, yes, will it happen over and over and over and over again, probably not.

This is especially true in these economic times where the homes involved are upside down. Since they are upside down and people owe more than the property is worth, FOR THE MOST PART, then how is there going to be anyone who will pay a surplus for the property?

This is more likely to happen in other areas, such as homeowner overpaying on mortgage via interest or surplus in escrow accounts, or bank accounts, or tax foreclosure sales.

I agree, too far and few between if you ask me.
That said, learn to be an investor, rather than looking for the easy street. Investing is hard work but the pay offs are well worth the efforts!

True, all good points, well its not that I'm looking for the easy street, just being a recent college grad with some debt , I felt this could be an alternate route in real estate to get involved and make some cash as little as it may be. Eventually when I am more experienced, build up credit and have reserves of cash saved, then it would be a more reasonable time to invest in properties. It would be nice to go to an auction and get a feel for how it works, and if a few bucks can be made from surplus foreclosure funds...why not?

Personally, I believe if you present your offer with a standard PSA with your personal name as the buyer and closing your own funds, you will be effective more often than you will be using any other method
Since you asked, I will answer. There is nothing wrong with that at all, I would just like to point out that you can make a ton more money all in one transaction (with little or no money and no credit) using some common RE investing strategies, short sale iinvesting for example. I see a lot of transactions come across my desk, both of my companies and that of others, and I can tell you for certain that many of them are completed with high profit margins and little out of money expenses.
Point being, invest your time and energy into something where the pay day is worth the efforts and it can be accomplished with hard work and diligence. Your situation or scenario certainly does not exclude you from succeeding as an actual RE investor!

I've been involved in surplus funds for quite some time. It is also known as excess proceed, overages, remainders and other lesser known names.

This is and can be a great business if worked properly. I have been doing this business for awhile. I am doing quite well and know others who are making good money from this business.

This is not "the next best thing". It has been around for many years, however, since real estate itself was "hot" for many years, the surplus fund business has been relatively unknown but to a few of us.

I disagree that "only the gurus are making money". That can be said of any business where there are gurus. Real estate especially. How many people buy a program for $1,000 or more, only to have it sit on a shelf and collect dust because someone had to actually work at the business and money just wasn't handed to them?

Anyone can make any business work if they work it hard enough and smart enough. In the surplus fund business, there is lots of money to be made. These overages can go back more than 20 years.

@Jeff Richman. Are you still in this business. It’s something I am interested in learning about. Where can I learn how to do this?

Hello Everyone,

Surplus Funds, Excess Proceeds, Overages and whatever else you want to call it can and does work very well in most Counties and States. I use to buy Pre-Foreclosures, Foreclosures and didn't even have to compete with everyone else. I am a former Court Records Expert and worked for "LexisNexis" doing Court Records Abstraction on all (58) County Superior Courts and all (4) District Federal Bankruptcy Courts in California.

Many Investors will tell you that it is "Hard" or Deals are "Few and Far Between" but, its NOT AT ALL! I think those Investors either don't want you to know the money that can be made or don't want their competition increased. I will die (10) deaths before I make a dent in the Case List that I have to work with that has Hundreds of Millions in Surplus Funds Cases. Its less than 1% Competition in this field as well. When I contact someone (Previous Property Owner) about a Foreclosure they had years ago and that $100K has been sitting earning "Interest" and waiting to be claimed by them, its like Christmas in February, March, April or May, etc.

For most, this would have been there largest investment that failed to "Foreclosure". Only to reap the benefits (Money) years later just amazes them and they cannot believe it. I have seen it with my own eyes many times over the last 15 years or so. I have done it all in Foreclosure Real Estate and knowing more the 90% of the people in that sector of Real Estate Investing. Don't believe the Investors or Guru's that have never done it before and cannot prove it with recent checks or cases.

It's not the "Sasquatch" in the Forrest! It really does Exist and is PROFITABLE!  The few that actually may know what they are doing in Surplus Funds, just may not want all of you coming over and spoiling our "Less Than 1% Competition"!

Happy Investing and Fighting Over The Same Deals. 

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Attorney's solicate homes forclosed on with potential overage regularly. It's a niche field that many people don't know ab out. I've been involved in a few. 

My name is Sherese and I am interested in becoming an investor with the surplus fund market.

I just want to learn what is actually being said to the homeowners who is owed this money. (What do you say to the homeowners)

@Jeff Richman  @Darryl Johnson  @Nina Grayson @Brett Goldsmith  I've recently moved my family to the Charlotte, NC area(Rock Hill) and would love to know more about the surplus fund process (Attorney, contracts, etc). I'm currently a full time electrical engineer looking for ways to reduce college debt. I have sent you all request.

Any beginner investment tips would be greatly appreciated! It doesn't have to be solely about surplus funds, I want to learn as much as I can about the Real Estate Investment world. I'm not looking for a "get rich quick scheme" but it would be nice to get some guidance. Everyone has to start somewhere. Look forward to hearing from you all. Have a good day!

@Kendall Jenkins

Thanks for the colleague request!  

I suggest you contact foreclosure attorney's who partner with Surplus Funds Investors.  You need them to present the case to the court, and most likely, to submit the forms to the court for filing before that.  Some attorneys may want 50%, some less, just be sure if you are doing most of the work to get the former owner's contract, that you get the larger share.  The standard fee for SFIs is up to 30%, and it depends on the amount and how much work is involved in the process.  The good news is that most former owners don't know it's there, so they need the help and are willing to pay the fee.  You can also look at REIAs in your area to see if there are any Surplus Funds training or mentors.  As with any asset class, it's good to study it, assess if it matches your risk tolerance, and then dive-in.

Nina

@Nina Grayson Thank you for taking the time to give some AMAZING feedback! 

Hopefully i'll be able to return your kind gesture to yourself or someone else one day. I really appreciate your time. Thanks again! 

Here are the headwinds you would be dealing with if you dive into surplus funds.

1) unclaimed money 💴 tactic have been used by, many scammers taking money up front in return for helping owner claim the surplus funds. Such scammers are referred as fraudsters...  

What does it mean for legitimate surplus funds recovery company?

It means facing headwinds in attempting to convince home owners that there is really surplus money left over for their property.

Many homeowners been trained by the internet to ignore any letters or emails or phone calls from anyone calling and offering you free money.  

The mentality is already formed in their brain.... that it’s too good to be true.... hence even if you are legitimate company.... you can still face headwinds.... when reaching out to such people.

2) Some older folks have dimensia and may very well sign your contract, but also sign the very same contract with other excess money finders..... leaving you in uphill battle fighting for money... that you would less likely to receive.

3) many surplus funds may appear to have money.... but when you look super deep into many of such claims... you will see that in reality there is a lien on the property, or 2nd mortgages or multiple people.... who funds belong too....

Which means there is really no surplus funds for many of the claims, even though the lead website tell you there are surplus funds.

4) many folks on the Internet advise homeowners that they can get their funds simply by filling out several simple forms and claiming money yourself without having to pay any insane fees to any finders.

However if homeowner is not capable in filling out these form they shouldn’t pay more then 10 to 20 percent to finders who will assist in claiming funds.

10 to 20 percent fees don’t exactly cover the costs of your skip tracing efforts, processors fee or attorney fee.

You need at least 45 percent to make it consistent (depending on the property value).

Some states cap the percentage to 10 percent. Meaning you can’t get more than 10 percent....

Some states may not have enough surplus funds.

The ones that do have a lot is New York and California.

Now I am not a guru, I haven’t done surplus fund searches.

I prefer personally learning and coaching about multi family commercial REI inter mixed with wholesailing commercial multi family apartment buildings...

Or even wholesailing regular houses..., as it goes for surplus funds...

If you have time to kill and willing to take risk.... doing it consistently.... facing the headwinds....  then go for it.... 

Then let me know how it goes.  This is indeed a legit strategy, but if you don’t put work into it.... then like with everything else.... it can fail...

Key is calling these homeowners consistently and following up.

As it goes going to auctions and recording how much property sold for, writing it down and chasing homeowner right away....

Indeed gives you bigger chance.... of striking a deal and signing owner under contract vs looking only at online lists...

Look for probate properties.... and look for foreclosure properties.

You don’t need to be super smart to make money in surplus funds, but you will need to know.... how to skip trace deals and send out letters, cold calling people and pivoting them.

@Rome Wells   Or your 84 YO mother says she got some thing in the mail  Send its to me

says she has funds somewhere. I put two and two together and realize where she owned property and probably let something go to tax sale.

I call the tax collector and I get 100% of the overage and send a thank you note to the surplus person who brought it to our attention. you have a very tough time collecting if the person who is due the surplus simply does not pay YOU ..

and in many counties this is very frowned on. 

Google Joe Kaiser

In my area most of the surplus amounts are fairly low. How hard to do you want to work for a percentage of $4,000. If you are taking a large enough percentage to make it worth your while then, then owners are going to start looking for it themselves. If you do get them to agree it will likely be frowned upon as you taking advantage of someone. 

PS I was referring to tax sale surplus when I said surplus amounts are fairly low. In MD and some other states Mortgage surplus business is basically illegal.

@Ned Carey   its like any other guru thing. you will have someone selling a how to and hold up a 50k check and say you too can do this :)

We gave it a shot a decade or so ago when there were tons of foreclosures but its a super tough niche. you basically need to be a private detective with all those same skills. then some closing skills.

Originally posted by @Rome Wells :

Here are the headwinds you would be dealing with if you dive into surplus funds.

1) unclaimed money 💴 tactic have been used by, many scammers taking money up front in return for helping owner claim the surplus funds. Such scammers are referred as fraudsters...  

What does it mean for legitimate surplus funds recovery company?

It means facing headwinds in attempting to convince home owners that there is really surplus money left over for their property.

Many homeowners been trained by the internet to ignore any letters or emails or phone calls from anyone calling and offering you free money.  

The mentality is already formed in their brain.... that it’s too good to be true.... hence even if you are legitimate company.... you can still face headwinds.... when reaching out to such people.

2) Some older folks have dimensia and may very well sign your contract, but also sign the very same contract with other excess money finders..... leaving you in uphill battle fighting for money... that you would less likely to receive.

3) many surplus funds may appear to have money.... but when you look super deep into many of such claims... you will see that in reality there is a lien on the property, or 2nd mortgages or multiple people.... who funds belong too....

Which means there is really no surplus funds for many of the claims, even though the lead website tell you there are surplus funds.

4) many folks on the Internet advise homeowners that they can get their funds simply by filling out several simple forms and claiming money yourself without having to pay any insane fees to any finders.

However if homeowner is not capable in filling out these form they shouldn’t pay more then 10 to 20 percent to finders who will assist in claiming funds.

10 to 20 percent fees don’t exactly cover the costs of your skip tracing efforts, processors fee or attorney fee.

You need at least 45 percent to make it consistent (depending on the property value).

Some states cap the percentage to 10 percent. Meaning you can’t get more than 10 percent....

Some states may not have enough surplus funds.

The ones that do have a lot is New York and California.

Now I am not a guru, I haven’t done surplus fund searches.

I prefer personally learning and coaching about multi family commercial REI inter mixed with wholesailing commercial multi family apartment buildings...

Or even wholesailing regular houses..., as it goes for surplus funds...

If you have time to kill and willing to take risk.... doing it consistently.... facing the headwinds....  then go for it.... 

Then let me know how it goes.  This is indeed a legit strategy, but if you don’t put work into it.... then like with everything else.... it can fail...

Key is calling these homeowners consistently and following up.

As it goes going to auctions and recording how much property sold for, writing it down and chasing homeowner right away....

Indeed gives you bigger chance.... of striking a deal and signing owner under contract vs looking only at online lists...

Look for probate properties.... and look for foreclosure properties.

You don’t need to be super smart to make money in surplus funds, but you will need to know.... how to skip trace deals and send out letters, cold calling people and pivoting them.

 Look for probate properties? There's a court process that the estate has to go through. It's best to contact the PR.

My team works with Pre-foreclosures to help homeowners walk away with some of their equity or a share of the ARV in a Subject To, or a lease option to avoid foreclosure. The options we provide also help them with not having a negative public record on their credit reports, reducing their credit score, and preventing them from having to wait a minimum of 3 years to apply for a loan, even if they could qualify at that time with a low score. They get to walk away with some cash and make a fresh start. However, not all Pre-foreclosure homeowners see the help staring them in the face. They try to do Loan Mods only to find out they have to keep applying because the asset manager makes the approval process difficult so they get paid for every Loan Mod application. They try to do bankruptcy, but that only gives them 6-8 weeks of postponement and they can only do so many change of court dates before they are denied any further changes and have to go to court. By that time, they don't have the funds to pay the default and additional fees to reaffirm the mortgage to keep the home, so the property is seized.

Bottom line, many Pre-foreclosures in CA go to foreclosure because the owner is hoping for a hail-mary other than the one we give them.  We track all of the owners we speak with and for those that go to foreclosure, we review what it sold for to see if it sold for more than the default amount and additional fees.  If we see surplus funds of at least $20k, we reach out to tell them we can consult with them to get the surplus funds to them and we coordinate with the attorney to do so.  The attorney is the one paid the fee and we are paid from the attorney's fee.  Because we have the relationship with the owner, especially since they've met us and spoken with us on several occasions during the Pre-foreclosure, they are open to working with us.  Yes, there are hoops, and each state has specific laws and requirements, but it is a viable business if you do it with the intent to help those you have an established relationship with and you are not charging them some ridiculous fee.  

Disclaimer:  I am not providing any legal advice in this post.  

Question:  Georgia forms explicitly state you do not need a third party and they will not release the excess funds to a third party.  I have also heard if you find excess funds you can still pay the original owner for a quit claim deed even if the home has been sold to an investor.  The attorney stated at auction you really do not purchase the home but rather the banks/county's interest in the home and you can get a quit claim deed and then claim the excess funds.  what say ye wise investors???

@Nina Grayson Hi Nina! Do you usually do your pre foreclosure over in LA? I would like to establish a system like yours in the Bayarea. Interested in working something out?

@Barton Louie   Yes, I do it in South LA and Carson/Long Beach.  For the most part, I laid out the system above.  Keep in mind, my team are licensed real estate salespersons and brokers who work with owners in Pre-Foreclosure to avoid foreclosure.  Our objective is to put their property under a listing agreement and have a cash buyer ready to walk the property within 3 days and sign an offer.  That's how we get the postponement of the auction.  We then close in 15 days or less.  This is a fire sale and it gives the owner some of their equity and no foreclosure on their record - a fresh start.

In some cases, it's a standard listing and that requires more time before auction, and ideally, before they are scheduled for auction.  So, many of our deals are off-market cash sales.

Surplus Funds comes into the picture if they don't list and sell with us.

If the owner chooses not to sell and try other avenues, the majority will end up having the property sold at auction.  We have built a relationship with them through follow up and multiple touches towards listing.  So, it's easier for us to reach out to those whose homes sold to 3rd parties and have a surplus.  

Calling a List of Former Owners 

For those who we did not have much of a relationship with - did not give us their contact info, we have to locate them.  80% of surplus funds investing is finding the owners and heirs.  However, in CA a former owner is given a notice from the new owner to vacate in 21 days.  So, there is a window that they are still in the home.  That's the time to capture them, and it's best to do it via door-knocking.  

Of course, the first step to create a system is partnering with an attorney who does surplus funds in your area.

Originally posted by @Shari Poole :

Question:  Georgia forms explicitly state you do not need a third party and they will not release the excess funds to a third party.  I have also heard if you find excess funds you can still pay the original owner for a quit claim deed even if the home has been sold to an investor.  The attorney stated at auction you really do not purchase the home but rather the banks/county's interest in the home and you can get a quit claim deed and then claim the excess funds.  what say ye wise investors??

Every state's laws are different. In CA, the 1st party is the mortgator, the second is the lien-holder, the third is the buyer/Investor - if a third buys at auction vs. the bank (REO). Purchasing the bank's/counties interest in a home would be purchasing a Note. At auction, you are purchasing the property, but the transfer of title is processed as a quit claim deed. The excess funds can only be claimed via release by the trustee. There is a process of getting a release from the trustee for the surplus funds because they have to determine all parties who may have an interest in those funds; creditors, heirs, tax bills, etc. Once those parties are paid or released from interest, the remainder goes to the former owner, unless the buyer/Investors claims the funds, but that would require a release from the former owner.

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