Tax deed sale process and surplus

[Carolyn Morales]

I am confused about how the surplus works. I went to an auction and there was a fabulous brick home in an affluent neighborhood for 23k starting bid. 2 men haggle each other to 166 k. The surplus is listed. Does that mean the successful 166k bidder gets the surplus back? Does it mean other people can apply for that surplus and upon what basis is surplus awarded? Also, are the truest investors marketing to owners on the tax deed list before the sale date? Please be kind...

[Davido Davido]

There are likely multiple reasons that former owner's of properties sold at property tax foreclosure sales do not get the sale surplus automatically.  Often the owner is dead, committed, incompetent, imprisoned, lost, etc.   In many cases the owner simply can not be found.  My county makes concerted effort to locate the owner before the tax sale and provides notice to them about the method to claim an overage. Failure to notify, and/or improper notice, are reasons that a property tax foreclosure sale can be overturned after the fact.  A foreclosure sale which is later overturned  becomes an unwanted cost and time sink to the county, to the former owner, the new purchaser and to the courts.  Therefore, the courts require fairly stringent notification procedures.

However, after the property tax foreclosure sale is completed, any overage funds escheat to the county if not applied for by the previous owner within the statutory time limit (3 years here).  The county then has a very significant financial interest in the overages and no longer any incentive to look for or notify the previously unlocated owner.  Those interested in property tax foreclosure overages might find the following blog of interest.  A Washington State investor sued (successfully) by the Attorney General for scooping up millions in overages that the local counties had counted on.

www.pushedtoshove.com

That same investor changed his business model and now runs this site.

http://excessfunding.com/

See also:

http://www.taxlienuniversity.com/articles/tax-sale-overages.php