What happens to surplus funds after a foreclosure sale?

Surplus funds after a foreclosure sale refer to any remaining money after the property has been sold and all outstanding liens or claims against the property have been settled. If the sale price of the property exceeds the amount owed on the mortgage and any additional liens, the excess funds are typically returned to the borrower. This is because the borrower, who is the former owner of the property, has a legal right to any surplus generated from the foreclosure sale once all debts tied to the property are satisfied. This process ensures that the borrower is not left without recourse after losing their property and is fairly compensated for any value retained in the real estate asset.

In contrast, the lender does not keep the surplus as it is intended to reimburse the borrower for any equity they had in the property. The county typically does not receive these funds as they are not involved in holding liens on the property; their role usually pertains to property taxes and other assessments. Dividing among creditors is not the case here since the surplus is specifically about funds left over after paying off all liens, which results in the borrower being entitled to what remains. Thus, returning surplus funds to the borrower, provided that all liens are satisfied, aligns with the principles of equity in real estate transactions.