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Who is Entitled to Surplus Funds After a Tax Sale?

Posted by 15789465 on

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.

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10 comments

  • 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?

    Corey on
  • 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?

    deniselevans on
  • 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 ross on
  • 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.

    Denise L. Evans on
  • 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!

    Seung K on

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