The Priority Order for Sale Proceeds
A trustee sale is not a free-for-all. Arizona law sets a clear pecking order for who gets paid and when. The trustee must follow this sequence exactly. No party lower on the list receives anything until the parties above have been satisfied in full.
The trustee shall apply the proceeds of the trustee's sale in the following order of priority: 1. To the costs and expenses of exercising the power of sale and the sale, including the payment of the trustee's fees and reasonable attorney fees actually incurred. 2. To the payment of the contract or contracts secured by the trust deed.
A.R.S. § 33-812(A)(1)-(2)The first priority is the cost of the sale, including the payment of trustee fees and attorney fees. After that, the primary loan balance is covered. Any remaining proceeds go to junior lienholders in the order their liens were recorded. Next come condominium or planned community associations with valid lien claims. Finally, any leftover funds go to the former property owner.
What Happens to Excess Proceeds
If money remains after everyone in the priority chain has been paid, the trustee must notify the former owner within fifteen days. The trustee can also deposit surplus funds with the county treasurer for safekeeping. This happens by filing an order of the superior court in the county where the sale took place. Excess proceeds left unclaimed for two years are presumed abandoned. They are eventually transferred to the Arizona Department of Revenue.
The trustee must complete distribution or deposit within ninety days of the sale. Missing that deadline means the trustee forfeits their fees and faces interest penalties. Filing an application to claim surplus funds is the responsibility of any party who believes they are entitled to a share.
Why This Priority System Matters for Families
Many families affected by a trustee sale do not realize that surplus funds may exist. If the property sells for more than the total debt, that extra money belongs to the former owner. In practice, this affects families who built up equity in a home before falling behind on payments. Knowing how these proceeds are distributed can help families take the right steps to recover any surplus they are owed.
This statute also protects junior lienholders, such as second mortgage holders or contractors with mechanic's liens. Their claims are honored in order of recording date, giving them a defined place in the distribution chain.