After the sale: overbids, surplus money and unclaimed refunds

Bottom line first. Most foreclosure sales bring in less than what is owed, so there is no extra money. But sometimes a bidder pays more than the lender's bid. When that happens you may be owed money after the bills are paid. Call the public trustee's office after the sale and ask. You do not need to pay anyone to claim it.

The words you need

The public trustee is the county office that runs most Colorado foreclosure sales. The law calls whoever runs a sale the officer: the public trustee or sheriff (C.R.S. 38-38-100.3). The holder is the lender or whoever owns the loan paperwork (the "evidence of debt", a written promise to pay). The borrower is the person or company liable on the loan.

An overbid is the part of the sale price that is above the written bid the holder put in (C.R.S. 38-38-100.3). A deficiency, as the bid form uses the word, is a line for the part of the debt that the lender's opening bid does not cover.

Step 1: the lender's bid sets the bar

Before the sale the holder, or its attorney, must send the officer a signed bid. It must arrive by 12 noon on the second business day before the sale date (C.R.S. 38-38-106(1)(a)). If it is late, the officer continues (postpones) the sale for one week (C.R.S. 38-38-106(1)(b)).

The bid itemizes what is owed: principal, interest, late charges and other amounts. It also lists fees and costs the lender paid (C.R.S. 38-38-106(2)). Those costs can include reasonable attorney fees, the officer's expenses, publication and postage, property taxes and insurance the lender paid, and more (C.R.S. 38-38-107(3)). The law says these costs are deducted from the sale proceeds (C.R.S. 38-38-107(1)).

Step 2: who gets the overbid, in order

Here is the order, straight from the statute (C.R.S. 38-38-111):

1. The overbid first goes to any deficiency shown in the holder's bid. Then what is left is paid to the officer and held in escrow (a safe holding account) until all redemption periods end (subsection (1)). A redemption period is a window after the sale when certain others who are owed money can pay to protect their position.
2. When all redemption periods end, what is left goes, in order of recording priority, to junior lienors (people with a lien recorded behind the first loan, such as a second mortgage or a judgment) who properly filed a notice of intent to redeem and whose liens were not redeemed. Each is paid up to the unpaid amount of its lien plus fees and costs (subsection (2)). A lienor that did not file in time, or that is not allowed to redeem, gets no part of the overbid.
3. After those payments, any remaining overbid is paid to the borrower (subsection (2)).

Because the lienors are paid before you, the surplus can shrink or disappear. That is why you ask the public trustee what is on file.

Step 3: how you find out

If the public trustee has a website, it must show a notice telling borrowers in foreclosure to contact the office after the sale, because they may have money coming (C.R.S. 38-38-111(2.5)(a)). If the leftover overbid is $25 or more, the public trustee must make reasonable efforts to find your current address and mail you a notice no later than 30 days after the redemption periods end (C.R.S. 38-38-111(2.5)(b)). So keep your mailing address current with the office.

Step 4: the clock on unclaimed money

• The public trustee holds unclaimed overbid in escrow for six months from the date of the sale (C.R.S. 38-38-111(3)(a)(II)).
• If unclaimed and under $25 after six months, it goes to the county's general fund. If $25 or more, it is sent to the state as unclaimed property under the Revised Uniform Unclaimed Property Act (same section).
• If the unclaimed amount is over $500, the public trustee must publish a notice in a county newspaper and mail you a copy. The notice states the funds will go to the state treasurer if not claimed within six months of the sale (C.R.S. 38-38-111(3)(b)). The costs of publishing and mailing come out of the escrowed money (C.R.S. 38-38-111(3)(c)).

Money sent to the state is still held for the owner, but the process is slower. Do not wait. The details of that state process are outside this lesson, so ask the public trustee or the state's unclaimed property office.

Unclaimed refunds from curing or redeeming

A different case: someone overpays to cure a default (catch up the debt) or to redeem. The overpaid amount is a refund. If the owner does not claim it within one year after it became payable, it is presumed abandoned and reported and paid to the state treasurer (C.R.S. 38-38-114). If you ever overpay, ask for the refund in writing and keep a copy.

Warning: paid "finders" cannot be enforced

Some companies mail letters offering to get your surplus for a share. The law says an agreement to pay compensation to recover or help recover money due to you from the public trustee is not enforceable. Anyone who induces or tries to induce someone into such an agreement commits a class 2 misdemeanor (C.R.S. 38-38-111(2.5)(c)). You can contact the public trustee yourself at no charge.

Example with real numbers

Priya's house has a first loan. The lender's bid itemizes $276,000 in principal and interest plus $4,000 in fees and costs, so its bid is $280,000 and there is no deficiency. At the sale a third-party bidder pays $305,000.

1. Overbid = $305,000 - $280,000 = $25,000 (C.R.S. 38-38-100.3).
2. No deficiency, so the full $25,000 goes to the officer and is held in escrow (C.R.S. 38-38-111(1)).
3. After the redemption periods end, one junior lienor with a $9,000 lien (a second loan) had properly filed a notice of intent to redeem and was not redeemed. It is paid $9,000 plus any allowed fees and costs. Say its costs were $500, so it receives $9,500 (C.R.S. 38-38-111(2)).
4. Remaining = $25,000 - $9,500 = $15,500 to Priya as the borrower.

The remaining overbid is over $25, so the public trustee must try to find her address and mail a notice within 30 days after the redemption periods end. If she does nothing and the $15,500 stays unclaimed, the six-month clock and the state transfer in Step 4 apply. Because the amount is over $500, a newspaper notice is also required.

A second case: if the lender's bid was $270,000 against $280,000 owed (so a $10,000 deficiency) and the winning bid was $276,000, the overbid is $6,000. All of it goes first to the deficiency, so nothing is left for lienors or the borrower.

This is general education, not legal advice. Dates depend on your notices and the sale date, so check with your public trustee or a lawyer.