Last Updated on September 7, 2025
Tax Sale Overages: Pros, Cons and How to Claim Excess Funds
When a county sells a property at a tax auction for more money than what the owner owed in taxes, the extra money belongs to the property owner. This extra money is called surplus funds or tax overages. The rules about this money are different in each state. In some places, owners can get this extra money easily, while in others, there are rules that make it harder for them to claim it. For example, in Washington, property owners have three years to ask for their extra money. If they don’t claim it in that time, the money goes to the county, and companies that help people get their money can only take 5% as a fee.
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What is a tax sale overage?
When a property owner doesn’t pay their property taxes, the county or city files a certificate of delinquency. After that, they can take the property away from the owner. They sell the property at a public auction. The opening bid covers all the unpaid taxes, plus any interest, penalties, and extra fees. If someone buys the property for more than what is owed, the extra money is called the tax sale overage or overbid.
Example: A county forecloses on a property owing $10,000 in taxes and fees. At auction the winning bid is $50,000. The extra $40,000 is the tax sale overage and, under most state laws, belongs to the property owner.
How does it work
How does overage work
- Creation of overage
Overages happen when the bidding gets really competitive and the auction price goes higher than what you actually owe.
- Statutory authority
Many states have laws that stop counties from keeping extra money
- Claim period
Each state has a deadline for owners or lien holders to file a claim. In Washington, the old title holder has three years to claim any extra money. If no one claims it within that time, the money goes to the county
- Proof of ownership
When someone is facing a foreclosure, they usually have to show proof that they own the property. They also need to take care of any debts or claims recorded against it.
- Third‑party assistance
Some investors help people find their lost money and file claims for it. They take a portion of the extra money as payment. In Washington, these fees can’t be more than 5%
State differences and local context
Not every state lets property owners get back money from tax sale overages. In some time these states won’t allow it: Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, South Dakota, and Washington, D.C. If you want to go after these extra funds, look for states that use a method called premium bid or overbid when they hold their auctions.
Pros and cons of tax sale overages
| Pros | Cons |
| You don’t need much money to start. You just help property owners get their money. | Some states prohibit overage claims |
| Many tax sales happen every year, which creates lots of chances to find extra money | Owners may not respond or may pursue claims themselves, leaving investors unpaid |
| Counties often handle paperwork after you file a claim | Claims can take months to process; payment is not instant |
| States like Florida, Georgia and Texas offer high premium‑bid returns | Locating owners requires research and possible skip‑tracing, which may not always lead to compensation |
How to claim tax sale overages
- Confirm the property sold for more than the tax debt. Check county auction results or use professional databases to identify overages.
- Verify eligibility. Ensure your state allows claims and identify who is entitled to the money (recorded title holder at the time of foreclosure or lien holders). In Washington, the recorded owner must file within three years
- Gather documentation. You’ll need proof of ownership (deed, tax records) and proof that all liens are satisfied.
- File a claim with the county treasurer or court. Many counties provide claim forms; some require notarization or a court motion.
- Follow up. Processing times vary; some states or counties have statutory deadlines for payment.
Investor strategies and cautions
- Be aware of state statutes. Before spending time searching for owners, confirm that the county allows third‑party recovery and note any cap on fees (5 % in Washington
- Prepare for owner skepticism. Scams exist in the real‑estate sector Use clear contracts and professional communication to build trust.
- Consider starting with states that encourage premium‑bid returns (Florida, Georgia, Texas.
- Stay current on legal developments. The U.S. Supreme Court’s 2023 Tyler v. Hennepin County decision strengthened owners’ rights by ruling that governments cannot keep the surplus beyond the tax debt. Additional state‑level changes may occur.
Frequently Ask Questions
A tax sale overage is extra money leftover after a county sells a property at a tax auction for more than what the owner owed in taxes and fees.
When people bid on a property at a tax auction, the winning bid can be higher than the amount owed in taxes. The amount above what is owed is called an overage. Most states say this extra money belongs to the property owner
Usually, it’s the last person who owned the property or other people with a claim on it who can get the overage. They need to show proof that they owned the property and that any debts on it are paid.
The time to claim this money is different in each state. For example, in Washington, the previous owner has three years to file a claim. After that, the money goes to the county.
In some time, some states like Alabama, Arizona, Illinois, New York, and others do not let people claim tax sale overages.
Final thoughts
Tax sale overages can provide a niche opportunity for real estate investors and a valuable service for owners who might otherwise lose surplus funds. However, the rules differ by state and are evolving. Use authoritative sources and county websites to verify current statutes, claim deadlines and allowable fees. For Washington residents, remember that you have three years to claim surplus funds and that third‑party assistance fees are capped. By understanding the pros and cons and following proper procedures, you can make informed decisions about whether to pursue tax sale overages.
