Texas Excess Proceeds Attorneys: Recovering Surplus Funds

Recovering Excess Funds After a Foreclosure

Tax and mortgage foreclosures can be traumatic events, but sometimes end with a surplus. If a property sells for more than the total amount owed to lienholders and taxes, the remaining money is called excess proceeds or surplus funds. Under Texas law, these funds do not belong to the county or lender; they belong to the former owner of the property. Recovering these funds requires navigating strict statutes and court procedures, which is why many people hire an experienced Texas excess proceeds attorney to guide them.

At Rodgers Selvera PLLC, we help our clients navigate this process and get their money as fast and easy as possible. 

What Are Excess Proceeds and Who Is Entitled to Them?

At a foreclosure auction, the bidding must cover all outstanding liens, taxes, and sale costs. When the winning bid exceeds those amounts, the difference becomes excess proceeds. In Texas, the former property owner is generally entitled to this money. If the owner has passed away, their heirs may claim the funds by proving heirship. Other lienholders, such as mechanic’s lienholders or HOA associations, may also have a claim if there are unpaid liens.

Understanding the Texas Excess Proceeds Law

Texas Tax Code § 34.04 sets out the procedure for claiming excess proceeds. Key provisions include:

• Two‑year deadline for filing a claim: A petition to recover excess proceeds must be filed before the second anniversary of the sale. After two years, unclaimed proceeds are distributed to the taxing units (for example, the city or county).
  
• Priority of distribution: At the hearing, the court orders payment in priority. First to the purchaser (if the tax sale is void), then to taxing units for unpaid taxes, followed by other lienholders, and finally to the former owner or their heirs.
  
• Assignment restrictions: Texas heavily regulates assignments of claims (a legal transfer of your right to collect excess proceeds to someone else). An assignee must wait at least 36 days after the proceeds are deposited, cannot solicit in person or by phone, must pay at least 80% of the claim’s value to the assignor on the date of assignment, and must include a sworn statement with specific disclosures. Failing to follow these rules makes the assignee liable for the proceeds plus attorney’s fees.
  
• Attorney fee cap: An attorney’s fee for obtaining excess proceeds may not exceed 25% of the amount recovered or $1,000 (per property owner), whichever is less.

How Does Rodgers Selvera PLLC Help Claim Excess Proceeds in Texas

Claiming excess proceeds can be complicated. You must comply with detailed statutes, provide proper notice, and handle potential competing claims from lienholders or heirs. At Rodgers Selvera PLLC, we will:

1. Contact the court: We will locate the court that handled the sale and ask if there are surplus funds in the registry. The person who conducts the tax foreclosure (often a constable) must deliver excess proceeds to the court clerk within ten days. If the surplus is more than $25, the clerk sends written notice to the former owner within 31 days.
2. Confirm eligibility: We will check records, determine eligibility and help identify other potential claimants.
3. Gather documentation: We will help you prepare documents proving ownership or heirship (deeds, probate records, lien releases) and any assignments of claim. Texas law requires a detailed petition and sworn statements for assignments.
4. File a petition: We will file a petition in the court that ordered the sale as soon as possible. Serve copies on all parties to the underlying foreclosure case. After that a hearing will be set where the judge distributes the funds.
5. Represent you in court: If your claim for excess proceeds goes to court, our team will represent you, advocating for your right to the funds.
6. Negotiate with creditors: If other lienholders assert claims, we will negotiate settlements and argue priority.
   

Time Limits and Deadlines

• Two‑year statute of limitations: The clock starts on the date of sale; missing this deadline means forfeiting the funds.
  
• 36‑day waiting period for assignments: A claim cannot be assigned or transferred until 36 days after the funds are deposited.
  
• Notice period: If the surplus exceeds $25, the clerk must notify the former owner by certified mail within 31 days.
  

Because of these strict deadlines,  Rodgers Selvera PLLC advises clients to begin the claim process as soon as possible. Contact us today!