Why Many Homeowners Never Collect Their Surplus After Foreclosure

A foreclosure sale isn’t necessarily the end of the process for property owners. In some cases, a property may sell for more than the amount due. In these situations, the excess funds, or surplus, belong to the property owner.



The challenge is that these excess funds don’t automatically transfer to the property owner after all debts are settled. Property owners must actively work to claim the funds. As a result, a property owner may never claim money that’s technically theirs.

Foreclosures in Texas fall into two categories: tax foreclosures and mortgage foreclosures. The type of foreclosure determines how a property owner can claim the excess funds.

Tax Foreclosures

Following a tax foreclosure sale and satisfying all liens and other fees, the county where the property was located holds any excess funds. If the amount is greater than $25, the county clerk is supposed to inform property owners of any excess proceeds.

Counties only have to send a written notice of the surplus to the property owner’s last known address. Counties don’t have to track down property owners beyond sending that letter.

Property owners have two years following the sale of the property to collect excess funds. If they don’t begin the process before that deadline, they cannot claim them.

Once a property owner receives notification, they must petition the county for the surplus. They also have the burden of proving they have the right to claim the funds.

Mortgage Foreclosure

Texas law doesn’t provide a process for claiming excess funds from mortgage foreclosures. The process to claim these funds is less formal. It can also be more challenging to navigate because of the lack of guidelines.

In the case of a mortgage foreclosure resulting in excess funds, a trustee administrator will take control of the funds. Similar to a tax foreclosure, other liens are satisfied before the property owner can collect the excess.

The administrator should notify the property owner of the surplus. Once the property owner receives notification, they can contact the trustee administrator about collecting the surplus. If the property administrator doesn’t release the funds or otherwise doesn’t cooperate, a property owner can take legal action.

Hire a Skilled Lawyer Who Knows Texas

If you’ve had a property foreclosed on, you may have a right to collect excess funds, and the attorneys at Manfred Law can help. Call us at 713-547-5460 or contact us online to schedule your consultation.