Should You Sign With a Foreclosure Surplus Company After Your Auction?

In a recent Florida case, a homeowner lost her townhouse to a homeowners association foreclosure. The home sold at auction for more than she owed, leaving about $17,500 in surplus money in the court registry.

Within hours of the auction, a surplus recovery company had her signature on an agreement giving the company the exclusive right to claim that money. A few weeks later, a judge ordered the entire surplus paid out to the company.

Then something strange happened. The money was never picked up. Years later, the state took it as unclaimed property.

This story has two lessons every former homeowner should know: what these companies actually do, and what happens to your money if nobody follows through.

What surplus recovery companies do

When your home sells at a foreclosure auction for more than the judgment against you, the leftover money is called surplus funds. It sits in the court registry, and it generally belongs to you, the former owner.

Surplus recovery companies watch auction results. When they spot a surplus, they move fast to find the former owner, often the same day as the sale. Their pitch is simple: sign this paperwork and we will handle the claim for you.

What they are asking you to sign is an assignment. You are giving the company the legal right to stand in your shoes, file the claim with the court, and collect the money. The court then pays the company, not you, and the company is supposed to pay you your share afterward.

For doing this, the company takes a cut. In the case above, it was 17 percent of the surplus. In other cases it is 12 percent or more. The percentage varies from company to company, so there is no single standard deal.

What signing really means

Before you sign anything, understand what the paperwork does:

It is usually exclusive and hard to undo. Once you sign with one company, you generally cannot sign with another one or file the claim yourself while that agreement stands. Signing twice with two different companies is a real problem that has ended up in court.

The court pays them first. The disbursement order goes to the company or its attorney, not to you. You are trusting them to send you your share after they take their cut.

Read the percentage carefully. Find out whether costs and fees come out before or after the split is calculated. Find out what happens if no money is ever collected. Get every promise in writing.

There is nothing illegal about these companies. But you should know that you have other options, and the person knocking on your door the day of the auction is not going to list them for you.

What happens if you do nothing

Here is the part most people miss. The surplus does not come to you automatically. Nobody mails you a check. The money sits in the court registry until someone files a claim for it.

If nobody claims it, the clerk eventually reports the money as unclaimed property, and the state takes custody of it. You may still be able to recover it from the state later, but that is a much harder road than claiming it from the court.

And here is the twist in the story above: the company did everything right on paper. It signed the owner, filed with the court, and won a judge's order for the full $17,500. Then it apparently never collected the money, and the state took it. Paperwork alone does not move money. Someone has to follow through, cash the check, and pay the owner.

What you can do instead

You are not required to sign with anyone. Your options include:

1. File the claim yourself. The surplus claim process is public. The clerk's office has the forms, and the docket showing the surplus is a public record you can look up.
2. Hire a Florida attorney. Some attorneys handle surplus claims for an hourly or flat fee, which can cost far less than giving up a percentage of the money.
3. Shop around if you use a company. Compare percentages, ask how costs are handled, and never sign the same day someone shows up without reading every word. A legitimate company will still be there tomorrow.

The money is yours under the law. The only question is who does the paperwork to get it, what they charge you for it, and whether they actually finish the job.

This article is for general information only and is not legal advice. Every case is different; consult a licensed Florida attorney about your specific situation.