Actually Lynn, let me clarify this for you. Surplus funds are only distributed to junior lienholders relative to the foreclosing lien. That means the fight between the HOA and the second mortgage is strictly about who takes that pot of surplus, not about you.
Once the foreclosure sale happens, your purchase wipes out those junior liens. Whether the HOA or the second mortgage gets the surplus, it doesn’t create a new obligation for you to pay them. If a lienholder had a truly superior claim, they wouldn’t be filing for surplus at all, they’d be coming after the property or you directly.
So to put it simply: the parties who go after the surplus are doing so because that’s the only avenue left to them. By claiming it, they effectively give up chasing you, since their lien was already cut off by the foreclosure. The only ones who can still affect you are superior lienholders (like property taxes or sometimes certain HOA “super liens”), and those don’t come out of the surplus, they attach to the property itself.
Now… do you have actual proof that the HOA filed a claim for the surplus? If that’s the case, that’s actually good news. But in my experience, many HOAs don’t bother with the surplus at all, then, when you introduce yourself as the new owner, their response is usually: “Nice to meet you… here’s the bill.”
In Florida, surplus funds from a foreclosure sale get paid out according to lien priority, not who files first. Filing the same day doesn’t really matter.
*First priority is the foreclosing plaintiff (usually the 1st mortgage). They get paid in full if possible.
*After that, junior lienholders get whatever is left, in the order their liens were recorded. A 2nd mortgage almost always records before the HOA’s lien, so the 2nd mortgage would usually take priority over the HOA.
*HOA/COA liens are generally inferior to any mortgage recorded before them, unless the governing docs or state statute gave them “super lien” status (in Florida, they don’t get full super lien priority like in some other states — they only get limited priority for 12 months or 1% of the mortgage balance, whichever is less).
So in your scenario: if both the 2nd mortgage and the HOA file for the surplus the same day, the 2nd mortgage still has first dibs, and the HOA would only get something if there’s money left after that.
First of all Lynn, I don’t quite get why you’re worried about that part, as the potential winning bidder, it’s really the lender’s or lienholder’s problem, not yours. The surplus funds from a foreclosure sale belong to the parties who were owed money, not to the bidder who buys the property. When both a second mortgage holder and an HOA file claims, the court decides priority. Normally, priority follows the order of recording, so a second mortgage recorded before the HOA lien would be first in line. But in some cases the association can claim a “super lien” for a limited amount of unpaid assessments, because their priority rights come from the condo/HOA declaration you agree to when you buy into the community. That acceptance gives the HOA a legal hook, and it means part of their claim might jump ahead of junior mortgages even if the mortgage was recorded earlier. Either way, it’s the judge who sorts out the distribution, not the bidder.
Thank for your clarifying. The reason I ask is that I purchased a property at auction with this exact situation, the second mortgage and HOA are going to court to determine who gets the surplus. If the second wins than I have to pay the HOA which is over 10K.
