What surplus money is and how a sale creates it
Finding and claiming surplus money · 1 study hours
Bottom line: An overbid is whatever a foreclosure sale brings in above the lender's own written bid; it is applied to any deficiency first, then held in escrow until the redemption periods end.
Bottom line first. If your Colorado home was sold at a foreclosure auction for more than the lender's bid, the extra money can belong to you. Check whether money is waiting for you, for free, before you sign anything or pay anyone. This lesson explains where that extra money comes from, so you can read your own sale papers.
Losing a home is hard, and the paperwork afterward can feel like a second loss. Take it one step at a time. This course starts after the sale. If you still need to understand how the foreclosure itself works, see the Colorado foreclosure course at /courses/colorado-foreclosure/.
The auction in plain words
In a foreclosure, the lender (the law calls it the holder of the debt) asks to sell the home to collect what the borrower owes. In a foreclosure under a deed of trust, the sale is run by a public trustee, an officer who handles these sales for the county. In a court foreclosure the sale is run by the sheriff. The law calls whoever runs the sale "the officer" (C.R.S. 38-38-100.3(17)).
Before the sale, the holder files a written bid. It must show, line by line, everything the borrower owes the holder: the loan balance, interest, late charges, and the fees and costs of the foreclosure. The form also has a line for the deficiency, the part of the debt the holder's bid does not cover (C.R.S. 38-38-106(2)). The holder does not have to bid more than the total it is owed (C.R.S. 38-38-106(6)).
Anyone else may then bid against the holder. The highest bid wins. That is how a house can sell for more than the debt.
What is an overbid?
The law gives the extra money a name. An overbid is the amount a property sells for that is more than the holder's written bid (C.R.S. 38-38-100.3(17.3)). Many people call it surplus money or excess proceeds. This course uses "overbid" because that is the word in the statute.
No overbid exists if the winning bid is the same as the holder's bid. That is common: the lender often wins its own auction at its own number. An overbid exists only when someone outside bids higher than the holder.
Where the overbid goes first
The statute sets two steps. First, the overbid is applied to any deficiency shown in the holder's bid. Second, whatever is left is paid to the officer, who holds it in escrow (kept safe by a neutral party) until all the redemption periods end (C.R.S. 38-38-111(1)). A redemption period is a short window after the sale when certain lienholders may step in and take over the sale (we cover this in lesson fs-02).
After that, the money is paid out in a set order, and the former owner is last in line. So a sale can produce an overbid and still leave you with less than the full amount, or with nothing. The next lesson explains the order. This lesson is about how the pile of money is created.
Paper you may see: the certificate of purchase
No later than five business days after the sale, the officer signs and records a certificate of purchase. It lists the names of the original borrowers, the property, the sum paid for it, the buyer's name and address, the date of sale, the sale number, and any deficiency (C.R.S. 38-38-401(1)). The "sum paid" on this paper is a clue. If it is higher than the holder's bid, there may be an overbid.
The certificate also says the buyer gets a confirmation deed (the final deed) when every redemption period ends, unless someone redeems. So the sale is not final on the day of the auction.
The certificate is a public record, recorded with the county clerk and recorder. You can ask the public trustee's office for the sale number and the holder's bid, because the officer must make the holder's bid available to the public (C.R.S. 38-38-106(3)).
Why you may not hear about it
The law does require the public trustee to try to tell you. If the overbid left for you is $25 or more, the trustee must make reasonable efforts to find your current address and mail you a notice (C.R.S. 38-38-111(2.5)(b)). A public trustee who keeps a website must also post a notice telling a borrower to contact the office after the sale because there may be money due (C.R.S. 38-38-111(2.5)(a)). But mail goes to old addresses, and people move after a foreclosure. That is why checking yourself matters.
Example with real numbers
These numbers are made up to show the steps. They are not from a real sale.
Case 1: an overbid exists. Jordan's lender is owed $200,000 in all (loan balance, interest, fees and costs). The holder's bid is $200,000, so the deficiency is $0.
- At the auction, an outside buyer bids $260,000 and wins.
- Overbid = winning bid minus holder's bid = $260,000 - $200,000 = $60,000.
- Deficiency to cover first: $0. So the full $60,000 goes to the public trustee's escrow.
- The trustee holds it until all redemption periods end, then pays the people who are entitled to it, in order. Jordan may be owed what is left.
Case 2: the overbid is used up by the deficiency. Marcus owes the lender $250,000. The holder's bid is only $200,000, so the deficiency is $50,000.
- An outside buyer wins at $230,000. Overbid = $230,000 - $200,000 = $30,000.
- The overbid is applied to the deficiency first. $30,000 is less than $50,000, so all of it goes there.
- Nothing is left for escrow, and nothing is left for Marcus.
Case 3: same house, higher sale. If the buyer had bid $270,000, the overbid would be $70,000. First $50,000 covers the deficiency. The other $20,000 goes to escrow.
What to do this week
- Find the sale number and the date of sale. They are on your foreclosure notices and on the certificate of purchase.
- Call the public trustee's office for the county where the house stood. Ask: was there an overbid, and is any money being held?
- Do not sign anything that gives someone a share of your money until you have read lessons fs-03 to fs-05. Asking the public trustee whether money is held does not require paying anyone.
This course is general education, not legal advice.
Law cited
- C.R.S. 38-38-100.3
- C.R.S. 38-38-106
- C.R.S. 38-38-111
- C.R.S. 38-38-401
Key terms
- Holder
- The lender or other person entitled to collect the debt that the foreclosure is meant to pay.
- Borrower
- A person or business liable on the loan or deed of trust that was foreclosed.
- Public trustee
- A county officer who runs most Colorado foreclosure sales and holds the sale money.
- Sheriff
- The officer who runs the sale in a court (judicial) foreclosure; sale money goes to the court instead.
- Officer
- The statute's word for the public trustee or sheriff who runs the sale.
- Holder's bid
- The signed, itemized bid the lender files before the sale showing what it is owed.
- Overbid
- The amount a property sells for above the holder's written bid.
- Deficiency
- The part of the debt that the holder's bid does not cover.
- Escrow
- Money kept safe by a neutral party until it can be paid to the right person.
- Redemption period
- A short window after the sale when certain lienholders may pay to take over the sale.
- Certificate of purchase
- A recorded paper, issued within five business days of the sale, showing who bought the property and for how much.
- Confirmation deed
- The final deed the buyer receives once all redemption periods have ended without a redemption.
Flashcards
What is an overbid?
The amount a property sells for at a foreclosure sale above the holder's written bid.
Who is the 'holder'?
The lender or other person entitled to enforce the debt being foreclosed.
Does the lender have to bid more than it is owed?
No. It need not bid more than the total due to it as shown on its bid.
What is a deficiency?
The part of the debt the holder's bid does not cover.
What does the statute do with an overbid first?
It is applied to any deficiency shown in the holder's bid.
Where does the rest of the overbid go at first?
To the officer, who holds it in escrow until all redemption periods end.
When must the certificate of purchase be recorded?
No later than five business days after the sale.
What does the certificate of purchase show about price?
The sum paid for the property.
Is the sale final on auction day?
No. The buyer gets a confirmation deed only after all redemption periods end, unless someone redeems.
What does the public trustee's website notice tell borrowers?
To contact the office after the sale because they may have money due.
Quiz: 10 questions
Tap an answer. It shows right or wrong and opens the reason. Your score is saved in this browser and counts in the study app.
Under the Colorado statute, what is an overbid?
- A Any money the lender collects from the borrower after the sale
- B The lender's total bid at the auction
- C The amount a property sells for that is more than the holder's written bid
- D The fees the public trustee charges for the sale
Show answer and why
Answer: C. The amount a property sells for that is more than the holder's written bid
The definition is the sale amount in excess of the written or amended bid amount signed by the holder.
C.R.S. 38-38-100.3(17.3)
A lender is owed $180,000 and bids $180,000. An outside buyer wins at $215,000. How big is the overbid?
- A $35,000
- B $215,000
- C $180,000
- D $0
Show answer and why
Answer: A. $35,000
Overbid = winning bid minus holder's bid = $215,000 - $180,000 = $35,000.
C.R.S. 38-38-100.3(17.3)
Which of these is NOT a step the statute gives for a new overbid?
- A It is applied to any deficiency in the holder's bid
- B The rest is paid to the officer to hold in escrow
- C The money stays in escrow until all redemption periods end
- D It is paid straight to the former owner on the day of the sale
Show answer and why
Answer: D. It is paid straight to the former owner on the day of the sale
The statute applies the overbid to the deficiency, then holds the rest in escrow until all redemption periods end. Nothing is paid to the borrower on sale day.
C.R.S. 38-38-111(1)
What happens if the lender is the highest bidder and no one outbids it?
- A There is always an overbid equal to the loan balance
- B There is no overbid, because the winning bid equals the holder's bid
- C The borrower is paid the lender's whole bid
- D The sale is cancelled
Show answer and why
Answer: B. There is no overbid, because the winning bid equals the holder's bid
An overbid is the amount above the holder's bid. If the holder's own bid wins, nothing is above it.
C.R.S. 38-38-100.3(17.3)
Marcus owes $250,000. The holder bids $200,000 (deficiency $50,000). An outside buyer wins at $230,000. How much is left for escrow after the deficiency?
- A $30,000
- B $20,000
- C $0
- D $50,000
Show answer and why
Answer: C. $0
Overbid = $230,000 - $200,000 = $30,000. All $30,000 is applied to the $50,000 deficiency first, so $0 remains.
C.R.S. 38-38-111(1)
Within what time must the officer record the certificate of purchase?
- A No later than five business days after the sale
- B Within five years
- C On the morning of the sale
- D Within six months
Show answer and why
Answer: A. No later than five business days after the sale
The certificate must be executed and recorded no later than five business days after the sale.
C.R.S. 38-38-401(1)
In these statutes, who is 'the officer' that conducts the sale?
- A The county assessor
- B The public trustee or the sheriff
- C The state treasurer
- D The lender's attorney
Show answer and why
Answer: B. The public trustee or the sheriff
The definition says the officer is the public trustee or sheriff conducting the foreclosure. The lender runs neither the sale nor the escrow.
C.R.S. 38-38-100.3(17)
What does a certificate of purchase NOT contain?
- A The sum paid for the property
- B The date of sale
- C The names of the original grantors of the deed of trust
- D The borrower's bank account number
Show answer and why
Answer: D. The borrower's bank account number
The list in the statute includes the sum paid, the date of sale and the original grantors' names. It has no bank account number.
C.R.S. 38-38-401(1)
Jordan's lender is owed $200,000 and bids $200,000. The winning bid is $260,000. After the deficiency of $0, how much goes into escrow?
- A $260,000
- B $200,000
- C $60,000
- D $0
Show answer and why
Answer: C. $60,000
Overbid = $260,000 - $200,000 = $60,000. With no deficiency, all $60,000 goes to the officer's escrow.
C.R.S. 38-38-111(1)
Why can a sale produce an overbid and still leave the old owner with nothing?
- A The public trustee keeps all overbids
- B The money is applied to a deficiency first and other people may be paid ahead of the borrower
- C Only lenders can receive overbids
- D Overbids are paid only after twenty years
Show answer and why
Answer: B. The money is applied to a deficiency first and other people may be paid ahead of the borrower
The deficiency is paid first, and later lessons show junior lienholders are paid before the borrower gets what remains.
C.R.S. 38-38-111(1), (2)