Tax Sale Overages: How Liens and Judgments Affect Your Surplus Claim

When a property is sold at a tax foreclosure auction for more than the amount owed in back taxes, the extra money—known as tax sale overage or surplus funds—should rightfully go to the former homeowner. However, claiming those funds isn’t always straightforward. If there are liens or judgments against the property, they may impact your ability to recover the full amount.

Understanding how debts, IRS liens, and court judgments affect surplus funds can help you navigate the process and maximize your claim.

How Liens and Judgments Work

A lien is a legal claim against a property due to unpaid debts, while a judgment is a court order requiring payment of a financial obligation. These can attach to your home, even after it has been sold in a tax foreclosure, and may determine whether you receive surplus funds.

Here’s how different types of debts impact your claim:

1. Mortgage and Home Equity Liens

If you had a mortgage or home equity loan on your foreclosed property, the lender may have the first right to claim any surplus funds before you do. This depends on whether the foreclosure sale fully satisfied their debt.

If the loan was paid off before the tax foreclosure sale, you can likely claim the overage.
If the lender was still owed money, they may file a claim to recover their loss first.

2. IRS and State Tax Liens

The IRS or state tax agencies may place a tax lien on your property if you owe unpaid taxes. These liens do not automatically disappear after a foreclosure, and the government may take priority in claiming surplus funds.

IRS liens generally follow the property, even after foreclosure. If the lien is still active, the IRS may seize your surplus funds to cover the tax debt.
State tax liens work similarly and could reduce or eliminate the amount you receive.

3. Court Judgments and Lawsuits

If you lost a lawsuit and owe money due to a court judgment, the winning party may have placed a judgment lien on your property. This means they have a legal right to claim any excess funds before they are released to you.

Child support judgments: Unpaid child support is one of the most common reasons surplus funds are withheld.
Credit card or medical debt judgments: If creditors obtained a court order against you, they might file a claim for your surplus funds.

4. Mechanic’s and HOA Liens

Unpaid homeowners’ association (HOA) fees or contractor bills (mechanic’s liens) could also affect your ability to recover surplus funds. Some states allow HOAs to collect from tax sale overages before releasing any funds to former homeowners.

How to Determine If Liens or Judgments Affect Your Claim

If you’re unsure whether liens or judgments could impact your surplus funds claim, take the following steps:

✅ Check the county records – Most liens and judgments are recorded in public property records at the county courthouse.

✅ Order a title search – A title report will reveal any existing liens or legal claims that could affect your funds.

✅ Consult a professional – A surplus funds recovery specialist, like Surplus Refund LLC, can help you determine your eligibility and handle any lien-related complications.

Can You Still Claim Surplus Funds If You Have Liens?

Yes, but it depends on the amount of your debts versus the surplus available.

🔹 If the surplus exceeds your debts: You may still be eligible to receive the remaining balance after the liens and judgments are paid.

🔹 If the debts exceed the surplus: The funds may be used entirely to satisfy outstanding obligations, leaving nothing for the former homeowner.

🔹 If certain liens do not apply to surplus funds: Some liens, depending on state laws, may not have a claim on tax sale overages, allowing you to recover your money.

How Surplus Refund LLC Can Help

Navigating surplus fund claims with liens and judgments can be overwhelming, but Surplus Refund LLC specializes in helping homeowners recover what they’re owed.

✅ We investigate potential liens and legal claims.

✅ We handle the claim process on your behalf.

✅ We work to maximize your recovery, even if debts exist.

Don’t leave your surplus funds unclaimed. Contact Surplus Refund LLC today to see how we can help you recover what’s rightfully yours.