Detailed Answer
When a property sells at a New Mexico trustee sale for more than the outstanding debt, the excess proceeds—called surplus funds—go into court and await distribution. The original owner (the trustor) has the first claim. However, other creditors or lienholders may step forward to claim part or all of the surplus. To determine whether they have valid claims, follow these steps:
- Perform a Title and Public Records Search
Visit the County Clerk’s Office or use an online records portal to identify all recorded liens and encumbrances on the property. Key items include:- Mortgages and deeds of trust
- Judgment liens
- Mechanic’s or construction liens
- IRS or state tax liens
- Uniform Commercial Code (UCC) financing statements
- Understand Lien Priority
New Mexico law generally honors recording dates when establishing priority. In most cases:- Senior liens recorded first get paid before junior liens.
- Tax liens (federal and state) often enjoy special priority under NMSA 1978, §48-1-23.
- Mechanic’s liens must comply with notice and perfection rules under NMSA 1978, §48-1-27.
- Review Court Procedures for Surplus Distribution
After the sale, the trustee deposits surplus funds with the district court clerk. Under New Mexico Rule of Civil Procedure 1-070(B), the court notifies potential claimants. Creditors must file a timely application to claim funds. The typical deadline is one year from the date of sale. - File a Claim or Object
If you identify a lien that remains unpaid, you or your attorney must file a petition with the district court. Include:- A certified copy of your lien document
- Proof of recording date
- A calculation showing the amount you believe is due
The court will hold a hearing if multiple creditors file competing claims. It will then issue an order distributing the surplus in order of priority.
Example: Jane’s home sold for $300,000 at trustee sale. The first mortgage balance was $250,000. That leaves $50,000 in surplus. Jane finds a second mortgage for $30,000 and a judgment lien for $15,000. Both are recorded. Jane files for the full $50,000. The court pays the second-mortgage holder $30,000, the judgment creditor $15,000, and returns $5,000 to Jane.
Disclaimer: This article provides general information under New Mexico law. It is not legal advice. Consult a licensed attorney before acting on these topics.
Helpful Hints
- Use a reputable title company or attorney for a comprehensive lien search.
- Check both county and state tax authorities for outstanding tax liens.
- File your surplus‐funds claim early to avoid missing court deadlines.
- Keep certified copies of all lien documents and recording receipts.
- Attend the surplus‐funds hearing in person or by attorney to protect your claim.