Excess mortgage foreclosure proceeds during probate

Al: Hey, Tom, had had a quick question about probate. Now, I'm a realtor over in Brevard County and I was approached by family member-- The mother and dad had passed away. They never went through probate with their property, and the property is going to foreclosure auction Wednesday next week.

Attorney Tom Olsen: Oh, boy.

Al: They ask if anything could be done. I said, "I don't know I'm not an attorney," so I'm calling to see what your thoughts are.

Tom: Is there any equity in the property?

Al: There is, yes. Actually, I did some title work on it, and there's $66,000, first mortgage, and then what's actually owed now is 100, but the house is valued about 350.

Tom: Just out of curiosity, if you were talking to those people and said, "Why on earth have you ignored this for so long and put this piece of property at risk," what would they say?

Al: I run into that all the time, Tom, I've been a broker for many years, and I always shake my head at this, but the answer is they don't know any better. They didn't realize that first it would go to foreclosure that rapidly. It's been about a year and a half. I said, "Well, that's sounds like it's not too rapid to me." I've seen them go like six months.

Tom: The fact that a property's in foreclosure normally doesn't bother me because the foreclosure process takes so long, but they have truly waited until the very last minute. I'd like to say there would be hope for them, but if you're telling me that property is literally going to be auctioned on the courthouse steps next Wednesday, could they stop it? The answer is probably no.

Al: Yes, I was afraid. Here's the next part of the question-- [crosstalk]

Tom: I'm not going to say it's impossible. What you'd have to do would be-- An attorney would need to contact the attorney that's representing the lender in the foreclosure, and beg and plead, "Would you postpone this sale to down the road, to give us time to do a probate, and get it sold, or refinance?" Maybe he might be willing to do so, but that's a big, big, big, big, huge ask, Al.

Al: Yes. Son of a gun. Here's the other part of the question. They said, "Well, what happens to the--" Let's say it's sold for-- I'm just using a number. Let's say it was sold for 200,000. What's required to pay the court and everybody is 100,000. What happens to the other 100,000? They asked me that. I said, "Again, I don't know."

Tom: Great question, Al. When that property is sold in the courthouse steps and it's sold for more than what the lender is owed, that excess, that $100,000, in your example, is held in a court registry, for the owner to come claim it. These kids, they can't claim it, because they're not mom or dad. This $100,000 is owed to mom and dad. Now, they're going to have to do a probate not to save this property from foreclosure. They're going to have to do a probate just to get access to that $100,000 that's sitting in the court registry.

Al: Oh, I see. Okay. They can call you in to do that. As I said, it's Brevard County, it's right on the coast there.

Tom: They certainly can. Al, again, we were talking about this property. There's $100,000 owed. It's worth 350, I think you told me. There's a good chance that there will be people bidding on there that day. There's a good chance that whoever the successful bidder is, will exceed that $100,000. Therefore, the good news is that there will be something there for these kids. It won't be the full $250,000 of equity but it will be something there for them. That's the good news.

Al: Oh, great. Okay. I'll let them know that information then, and they'll be in contact.

Tom: Thank you, Al. We appreciate that.

[00:04:17] [END OF AUDIO]