How surplus fund recovery works, and the law that backs your claim

01

Why the law is on your side

A foreclosure sale pays off a debt. When the sale brings in more than the debt, the difference is called surplus, overage or excess proceeds, and the starting rule is old and simple: it goes back to the person who owned the property.

The Supreme Court traced that rule back more than 800 years. In Tyler v. Hennepin County, Chief Justice Roberts wrote that the principle "that a government may not take more from a taxpayer than she owes can trace its origins at least as far back as Runnymeade in 1215," and that from the founding the federal government could sell only as much land "as may be necessary to satisfy the taxes due thereon." (Tyler v. Hennepin County, 598 U.S. 631 (2023), slip op. Part II-B)

The Court also counted where the states stood in 2023: "Thirty-six States and the Federal Government require that the excess value be returned to the taxpayer." The remaining states were the minority, and Tyler is the case that told them their rule broke the Constitution.

For mortgage foreclosures, state statutes have long sent the surplus to the former owner once the lender and any other lienholders are paid. The catch is that almost nobody is told about it in plain language, deadlines apply, and the money sits with the state or the records office until someone with the right paperwork asks for it.

02

The Tyler decision

Geraldine Tyler owned a one-bedroom condominium in Minneapolis. After she moved to a senior community, the property taxes went unpaid and, with interest and penalties, the debt reached about $15,000.

Minnesota law at the time let the county take title, sell the home and keep everything, including the $25,000 above the debt. Ms. Tyler sued. The trial court and the Eighth Circuit ruled against her. On May 25, 2023, the Supreme Court reversed in a unanimous opinion written by Chief Justice Roberts.

What the Court decided

• Keeping the surplus was a taking under the Fifth Amendment. The county "could not use the toehold of the tax debt to confiscate more property than was due," which the Court called "a classic taking in which the government directly appropriates private property for its own use."
• A state cannot erase the owner's interest just by writing a statute that says there is none. Quoting earlier cases, the Court said a state may not "sidestep the Takings Clause by disavowing traditional property interests."
• Unpaid taxes are not abandonment. The Court rejected the county's argument that Ms. Tyler gave up her home by not paying, because Minnesota's law looked only at the unpaid taxes, not at whether she had abandoned the property.

What it did not decide

• The Eighth Amendment question. Ms. Tyler also argued the forfeiture was an excessive fine. Because the takings ruling fully remedied her harm, the Court said it "need not decide" that issue. Justice Gorsuch, joined by Justice Jackson, wrote separately to flag problems with the lower courts' reasoning on it.
• Exactly how states must run surplus claims. The Court distinguished Nelson v. City of New York (1956), where the law gave owners a set window to ask for the surplus and they did not use it. That leaves room for states to require a timely claim, which is why deadlines still matter after Tyler.

Since 2023, state legislatures and courts have been rewriting their tax foreclosure rules to follow Tyler. The next section lists the cases and laws we can point you to directly.

04

Tax sale surplus vs mortgage foreclosure surplus

Tyler is about tax foreclosures. Most homeowners we speak with lost their home to a mortgage foreclosure instead, and that money is governed by a different set of rules.

Tax sale surplus

The home is sold, or taken, over unpaid property taxes. Before Tyler, a minority of states let the government or a tax-deed buyer keep the equity. Tyler and the state cases above say the owner's equity is protected property. States now differ on how a former owner asks for it, and some changes apply only to sales after a certain date.

Mortgage foreclosure surplus

The lender forecloses and the home sells at auction. State foreclosure statutes have long required the surplus to go to the former owner after the lender and any junior liens are paid. The money is usually held by the court or the trustee, and later it can move to the state's unclaimed property fund.

Florida is a clear example of how the mortgage side works. Its statute creates "a rebuttable legal presumption that the owner of record on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim." It also says that one year after the sale, surplus still held by the clerk is presumed unclaimed and is sent on to the state's unclaimed property program, unless a court proceeding is pending. (Fla. Stat. § 45.032)

Every state sets its own claim windows, and they are not the same for tax sales and mortgage sales. Some are measured in months, some in years, and the clock usually starts at the sale. Because the deadline depends on the state, the type of sale and the date, we confirm it for your property during the free assessment rather than quote a single number here.

05

How the claim proceeds with us

Same four steps you see on our home page, with the verification and notary steps shown where they happen.

1. 01

   Assessment

   You fill out a short assessment form with the address of the property that was foreclosed. We search public records and tell you what we find within 24 hours. There is no cost to check.

2. 02

   Recovery Process

   If funds appear to be held in your name, you review and sign our agreement and can ask us anything first. We then verify the funds with the records office: that the surplus exists, what liens come ahead of it, and what the state requires from you to release it.

3. ID

   Claim Submission Form Notary step

   Once the funds are verified, you sign the Claim Submission Form in front of a notary who confirms your identity. The notary can meet you at home, at a public place, or online. There is no cost to you for the notary.

   

4. 03

   Voluminous Filings

   We prepare and file the claim documents and handle the back-and-forth with the agencies involved. Multiple rounds of filings often take place over time, and we keep you updated as each one moves.

5. 04

   Distribution

   When the state releases the funds, we distribute your share into your bank account under the terms of your agreement.

06

Fees and timing

Checking your eligibility is free, and we respond within 24 hours. Our average recovery is $45K, though every case depends on the sale price, the liens paid ahead of you and the state's rules, so your amount may be higher or lower.

On timing, our estimated recovery period is typically 2-3 months, but it may vary according to state case complexity and third-party response times. Records offices set their own pace, and some states require a court hearing before money is released.

07

Frequently asked questions