Important Information Regarding Foreclosure
When individuals hear the term "foreclosure," they often assume it signifies a total loss.
Property lost.
Financial resources lost.
And the narrative concludes.
However, this is not always the case.
Take the case of Maria.
Maria owned a home valued at approximately $180,000. Unfortunately, life circumstances became complicated. Her work hours were reduced and a series of events led to her falling behind on property taxes — totaling around $8,000.
The county initiated foreclosure proceedings and subsequently sold the property at auction.
An investor acquired it for $95,000.
Herein lies a crucial point that many individuals may overlook:
The county is not primarily concerned with generating profit. Their objective is simply to recover the funds owed to them.
Consequently, they collected their $8,000.
This left a surplus of $87,000.
Seventy-eight thousand dollars.
Even though she lost her home…
That money remained legally hers.
Unfortunately, Maria believed that foreclosure indicated an absolute end. She assumed that whatever transpired at the auction was no longer her concern.
Meanwhile, the $87,000 remained unclaimed.
This excess amount is referred to as surplus funds.
This situation arises when a property is sold for more than the taxes, liens, and associated costs.
The government retains its owed amount.
The remaining funds rightfully belong to the former owner.
What is particularly surprising?
Many individuals do not claim these funds — primarily due to a lack of awareness of their existence.
Foreclosure often feels like a definitive conclusion.
Financially, it is not always so final..
ALABAMA
Statute: Ala. Code § 40-10-28 — Disposition of excess arising from sale
Sale Type: Tax Lien / Tax Sale
Redemption Period: 3 years after tax sale
Who Receives the Surplus:
Under Alabama law, the excess proceeds from a tax sale that remain after paying the amount of the decree, including costs and expenses, shall be paid over to any person or entity entitled to redeem the property upon presentation of proof that they have properly redeemed the property. After the three-year redemption period, surplus funds may be paid to the owner of the land at the time of the tax sale or a subsequent owner with proper proof of redemption or release/waiver of rights. If no proper request is received within the statutory time frames, the excess becomes county property.
ALASKA
Statute: Alaska Stat. § 29.45-480 — Proceeds of tax sale
Sale Type: Tax Foreclosure / Tax Sale
Redemption Period: Redemption period terminates before surplus distribution (varies by municipality)
Who Receives the Surplus:
Under Alaska law, if tax-foreclosed real property is sold and the proceeds exceed the total of unpaid taxes, penalty, interest, and costs, the municipality must provide written notice to the former record owner. Upon presentation of a proper claim within the statutory time period, the former record owner of the property is entitled to the portion of the proceeds that exceeds those amounts.
ALABAMA
Statute: Ala. Code § 40-10-28
Sale Type: Tax Sale (Tax Lien System)
Redemption Period: 3 years from date of sale
Claim Deadline: Claim must be made within 3 years after the date of sale (otherwise funds may escheat to county)
Who Receives the Surplus:
Alabama law provides that the excess arising from the sale of any real estate for taxes, after paying the amount of the decree, interest, costs, and expenses, shall be paid over to the owner, or his or her agent, or to the person legally representing such owner, upon proof of entitlement. If no claim is made within the statutory period, the funds may become county property.
ALASKA
Statute: Alaska Stat. § 29.45.480
Sale Type: Tax Foreclosure / Tax Deed
Redemption Period: Redemption period ends prior to resale (varies by municipality; typically 1 year)
Claim Deadline: Claim must be made within 5 years after the sale
Who Receives the Surplus:
If property acquired by tax foreclosure is sold and the proceeds exceed the total amount of unpaid taxes, penalties, interest, and costs, the municipality shall pay the excess to the former record owner upon presentation of a valid claim within the statutory period.
ARIZONA
Statute: A.R.S. § 42-18206
Sale Type: Tax Lien Foreclosure
Redemption Period: 3 years from date of tax lien sale
Claim Deadline: Claim must be filed within 2 years after the treasurer deposits excess proceeds
Who Receives the Surplus:
After payment of delinquent taxes, interest, penalties, and charges, any excess proceeds shall be paid to the person or persons who were legally entitled to the property at the time of the foreclosure sale, including th