Do you lose your equity in a Washington foreclosure?

One of the cruelest parts of foreclosure is the fear of losing not just your home but the equity you've built in it. Here's how equity actually works in a Washington foreclosure — and the much surer way to protect it.

What happens to your equity at auction

At a trustee's sale, your home is sold to pay off the loan. If it sells for more than you owe (plus fees and any junior liens), the leftover money — called surplus funds — legally belongs to you, the former owner. In Washington the surplus is typically deposited with the court, and you have to file a claim to get it (RCW 61.24.080/.090).

The problem with relying on surplus funds

• Auctions rarely maximize price. Homes often sell at auction for less than they'd bring on the open market — so there may be little surplus left.
• Junior liens get paid first. Second mortgages, HOA liens, and judgments come out before you see a dime.
• It's slow and bureaucratic. Claiming surplus funds means paperwork and waiting — and scammers prey on people owed surplus.

The surer way: sell before the sale

If you sell the home yourself before the trustee's sale, you capture the equity directly and immediately, at a real market price — no auction discount, no court claim, no waiting. Whether you list it or take a cash offer, you control the sale and keep what's yours. That's why, for any homeowner with equity, selling before foreclosure beats betting on surplus funds.

Good news on the downside, too: after a non-judicial foreclosure of your primary home, the lender generally can't come after you for a shortfall (RCW 61.24.100). The risk is to your equity and credit — both of which selling first protects.

This article is general information for Washington homeowners, not legal or financial advice. For free help, call the Washington Homeownership Hotline at 1-877-894-HOME or a HUD counselor at 1-800-569-4287.