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When a property with delinquent taxes is foreclosed and sold at an auction, it might fetch a higher price than the total amount due in property taxes, penalties, and fees. This extra money is referred to as tax sale overages or excess proceeds. Depending on the state, these funds usually belong to the former property owner and can be claimed after the tax sale. Here’s an overview and an example to make it easier to understand tax sale overages:

• Sale Price: The amount a property sells for at a tax sale auction.
• Owed Amount: Sum of unpaid taxes, penalties, and interest.
• Overage: The difference when the Sale Price exceeds the Owed Amount.

Example:

• Property’s Auction Sale Price: $50,000
• Total Taxes, Penalties, and Interest Owed: $30,000
• Tax Sale Overage: $20,000

In the hypothetical scenario above, you, the homeowner, are entitled to the surplus amounting to $20,000. Remember that each state or county has its own rules and timelines for claiming these funds, so it’s vital to inquire locally about the specific process for recovering any overages you’re owed.

Tax sale overages occur through a series of steps, beginning with homeowners failing to pay property taxes and culminating in surplus funds generated from auction sales exceeding the taxes owed. Now, onto the detailed steps:

If you, as a homeowner, have not paid your property taxes for a long time, your property will become tax delinquent. This debt accrues over time and can include penalties, interest, and other costs associated with the delinquency.

The county can then foreclose on the tax-delinquent property. This legal action may strip the property owner of their ownership rights.

The next step is for the county to auction off the foreclosed property. The proceeds from tax sale auction will be used to pay for your property back taxes.

Surplus funds are then generated when the winning bid amounts to more than the taxes, penalties, and fees owed on the property.

This surplus amount is known as the tax sale overage. You may claim the leftover amount from the sale depending on the state or county.

• Lack of Awareness: Counties are only required to send you a notification to your listed address, which is the one they sold. The previous homeowner is likely not to live there anymore. As such, most homeowners are unaware that they are eligible to claim what can sometimes be a huge sum.
• Missing the Deadline: The overage lists usually have a time limit for claiming your funds. If you miss that window, the money will be escheated to the county.
• Government Delays: County offices get backed up, so processing times can vary. Be prepared to wait, but be bold and follow up politely to check the status of your claim, especially if it takes longer than expected.
• Other Liens: Depending on your state, other parties might claim the surplus funds due to outstanding liens like mortgages or mechanic’s lien. Be prepared to work with the county to sort things out.