Who is Entitled to Surplus Funds After a Tax Sale?

I’ve received many questions regarding the proper ownership of surplus funds after a tax sale. This arises when, for example, a property is auctioned because of unpaid ad valorem taxes in the amount of $500. Bidding is aggressive, and the winning bid is actually $5,000.  Of that money, $500 pays the taxes. Who is entitled to the other $4,500?

The Alabama Code says the “owner” is entitled to the money.  But, is that the owner immediately prior to the tax sale, or the person who HAPPENS to be the owner years later, when someone files a claim and asks for the money?  As is often the case these days, if the bank forecloses a few months after the tax sale, is the BANK entitled to the surplus funds?

Again, we don’t know the final answer on this because the Alabama Supreme Court has not yet spoken.  Every county has a different answer for its own internal procedures when processing claims for surplus funds and deciding whether someone is entitled to them or not.  A Jefferson County class action lawsuit resulted in a ruling that the “owner” entitled to the surplus funds is the person who owned the property immediately prior to the tax sale.  This decision is not binding on any other county in the state, but it is very instructive and other counties might follow its lead.  If you want to read the decision, you can read it and download it by clicking HERE.

10 thoughts on “Who is Entitled to Surplus Funds After a Tax Sale?

  1. i purchased a vacant parcel at a tax sale, with an excess, that was subsequently assessed in my name. i let it be sold at the next year tax sale because the city of huntsville comunity development filed misdemeanor charges against me for not spending more money than the property was worth cutting the grass

    the property was sold at the subsequent tax sale with another excess

    am i entitled to the excess of the second sale when i sold the property, even though the prior owner is entitled to the excess of the first sale when i purchased the property?

    • Howard,
      I do not know the answer to that question. There is no Alabama Supreme Court guidance, and no statute that says what must happen and who is entitled to the 2nd set of surplus funds. Have you applied for the surplus funds?

  2. How does a person know if he/she is entitled to money? How is a person notified about excess funds? Is there a way to find out if a person is entitled to excess funds?

  3. How do you find out what the amount of the contingency fee or finders fee one can charge a person for finding their money for them? I live in Delaware and would like to try my hand at it here but I can’t find out what the minimum-maximum that can be charged.

    Also, do I absolutely have to get an attorney to check over a fee agreement or can I do it myself?

  4. I am owner of a house that was foreclosed. The county did a tax sale and there were overages. I filed for the overages but the treasurer indicates the bank is entitled to the money not me. Please advise how I can fight this?

  5. We have occupied a business that the previous owner did not pay taxes and have been on this property for over 10 years. An out of state company paid an excess bid of $15k. Now 3 years later they are offering us their interest in the property for $46k. The property is worth a good bid more and we still run our business from this location. We have no intentions on selling at this point. The title is a mess with leins of all nature that about expired. If we purchase their interest who gets the excess bid?

    • The original owner–the person who did not pay their real estate taxes–is entitled to the surplus bid. Before you spend $46,000 buying out the interest of the tax sale purchaser, you might want to get a title opinion and some good legal advice. I can recommend someone, if you like. Contact me via email at devans@deniselevans.com

  6. I have a friend who’s house was sold at a tax sale auction. The current recorded deed has her, her mother, and her step-father as each owning undivided 1/3rd interest. The mother is deceased and the step-father is very old (would be in his 80’s if alive) and not in touch with my friend, the step daughter. She is planning on filing a claim for the tax overage, but is she only due 1/3rd or would the county give her 100% of the proceeds if no one else files a claim, or does she have to file any proof that her mother is deceased to try to claim 2/3rd? Thank you for the info!

    • Under current law, whoever redeems is entitled to the surplus funds. Was the property redeemed in the past? If so, then only the current owner can claim the surplus funds.

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