Disclaimer: This article provides general information and does not constitute legal advice.
Detailed Answer
In Arizona, a foreclosure sale may generate surplus funds if the sale price exceeds the total secured debt, fees, and costs. Arizona law sets a strict order for applying sale proceeds under ARS § 33-807. To determine whether other creditors or lienholders can claim surplus funds, follow these key steps:
- Understand the Order of Priority
The trustee must apply proceeds in this sequence: trustee’s fees; unpaid principal, interest, and advances to the primary beneficiary; junior lienholders in order of recordation; and finally any surplus to the trustor or claimants. (See ARS § 33-807.) - Search Recorded Liens
Visit the county recorder’s office (in person or online) to search for recorded interests against the property. Common liens include mechanics’ liens, judgment liens, tax liens, and second deeds of trust. Any recorded lien that remains unpaid at the time of sale may have a claim on surplus funds. - Watch for the Notice of Surplus Monies
After the sale, the trustee publishes a Notice of Sale and, if there is surplus, a Notice of Surplus Monies under ARS § 33-811(C)–(D). This notice identifies the sale date, the surplus amount, and the deadline to file a claim. (See ARS § 33-811.) - File a Claim in Superior Court
A lienholder must file a written claim with the clerk of the Superior Court by the date specified in the notice—usually within one year of the sale. The claim must cite the recording date, book and page (or document number), and the exact amount owed. - Attend a Distribution Hearing
If multiple lienholders file claims, the court schedules a hearing to resolve conflicting priorities. The judge reviews the recordation dates and lien types to allocate surplus funds accordingly.
Helpful Hints
- Obtain a current title report to uncover all recorded liens and encumbrances.
- Check the clerk’s online docket for the Notice of Surplus Monies and claim deadlines.
- Keep copies of lien documents with recording stamps and dates for proof of priority.
- Contact the county recorder’s office to verify any unreleased or erroneous liens.
- Consider consulting a foreclosure or real estate attorney if multiple claims complicate distribution.