Some foreclosure auctions
put money in a homeowner’s pocket
U.S. foreclosure activity decreased to a 12-year low in 2017, but the number of housing markets recording
foreclosure-auction surpluses increased to a 10-year high.
A foreclosure-auction surplus occurs when a buyer at a foreclosure auction — typically a real estate investor —
purchases a property for more than is owed to the foreclosing lender. Proceeds from the surplus first go to junior
lienholders, but if there is still a surplus after that disbursement, the remainder goes to the distressed homeowner
who just lost a home to foreclosure.
It’s not uncommon for six-figure amounts
to be owed to the distressed homeowner,
particularly in high-flying markets in the
West, according to industry experts.
During a panel on foreclosure-auction
surpluses at a recent United Trustees
Association (UTA) conference, panelists
and members of the audience provided
story after story involving homeowners
owed hundreds of thousands of dollars in
foreclosure-auction surplus funds.
The description of the panel session in
the UTA conference materials was the
“With home values surging across the
West, foreclosure auctions are resulting
in sales proceeds far greater than the
balance due to the beneficiary. Trustees
are charged with dealing with these surplus funds. Find out what you can do to
reduce your costs and risks associated with surplus funds.”
Given that the homeowner has typically left the foreclosed property, finding homeowners to notify them about
the surplus funds is one challenge the trustees face. Another is simply convincing homeowners that these surplus
funds are for real and not just bait for a scam.
Data gleaned from trustee’s deeds (the publicly recorded deed transferring a property at a foreclosure auction)
does provide strong evidence of a rising trend in foreclosure-auction surpluses, according to an analysis by Attom
The analysis compared the median sales price of properties that sold at foreclosure auction to the median sales price
of those same properties the last time they sold prior to foreclosure — which would have been when the distressed
homeowner originally purchased the property. It broke down the numbers by year over 12 years, from 2006 to 2017.
Nationwide, single-family homes selling at foreclosure auction in 2017 sold for a median price that was $14,000
below the previous median sales price. That was the lowest deficit since 2006, when it was $9,244. The peak
deficit was in 2009, when homes selling at foreclosure auction sold for a median price that was $97,798 below the
previous median sales price.
In 28 of 118 metro areas included in the analysis ( 24 percent), however, the median sales price of single-family
homes that sold at foreclosure auction in 2017 was higher than the previous median sales price of those same
properties. That was up from 21 of the 118 metro areas ( 18 percent) with a surplus in 2016 to the highest level since
2007, when 36 of the 118 metro areas ( 31 percent) posted a surplus.
Not too surprisingly, the markets with the highest surplus between the median sales price at foreclosure auctions in
2017 and the previous median sales price were five West Coast markets. What may be surprising is the eye-popping
surplus amounts: San Jose, California, $163, 100; San Francisco, $122,200; Los Angeles, $92,227; Portland, Oregon,
$54, 100; and Seattle, $43,050.
On the other hand, homes selling at foreclosure auction are still selling at a deficit compared to their previous
median sales price in most markets ( 90 out of 118), led by the greater New York metro area, where the deficit
was $76,000 in 2017. Other major markets posting deficits in 2017 included Chicago ($62,000 deficit); Cleveland
($58,000 deficit); Philadelphia ($57,950 deficit); and Milwaukee ($50,939). n
Daren Blomquist is senior vice president at Attom Data Solutions. With
Attom Data Solutions since 2001, he is
the company’s primary media spokes-person and an expert on the housing
market. Blomquist is executive editor
of the company’s award-winning
Housing News Report and creates
comprehensive real estate reports
cited by thousands of media outlets
and referenced by numerous entities,
from local real estate investment
clubs to multinational corporations,
universities and federal, state and local
government agencies. Reach him at
Source: Attom Data Solutions
U. S. foreclosure-auction deficit based
U.S. Foreclosure Auctions
on median sales price comparison
Share of U. S. markets with