My name is Ted Thomas. I’ve been involved with tax lien certificate sales and tax deed sales for the past 3 decades.
Today I’m answering your question, “What is a tax overage list?
The topics I’m going to cover are:
- How the Process of Tax Sale Overages Begins
- How a Tax Auction Surplus Can Occur
- Who Gets the Tax Sale Overage?
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How the Process of Tax Sale Overages Begins
The business of tax lien certificates and tax-defaulted real estate is huge and what most of my readers like is that it’s lucrative when you know and understand how to do it.
Nationwide, there are over 3,000 local counties. The county Is a local taxing district, also called a jurisdiction, and it’s empowered by the legislature of the state to manage the government business within the county. T
he county may employ many, sometimes dozens or hundreds of people to do the various jobs of managing the county.
That would include firefighters, engineers to build and fix roads, supervisors, and let’s not forget the police department, sheriff’s officers, and all those administrative people who are working in the county offices.
The money to pay these people comes from individual property owners within the county, and it’s called property taxes, which property owners are required to pay.
In the event the property owner does not pay the property tax, the county treasurer will put the property in default. If the property taxes cannot be collected, the treasurer will seize the property with the express objective of selling it at a public auction to the highest bidder.
How a Tax Auction Surplus Can Occur
The starting bid on the tax defaulted property will be at least the back delinquent taxes. That might be only 10-20 cents on the dollar.
I’ve attended many auctions which will begin at only $100. However, eager bidders may raise the price considerably higher than $100. The highest bidder wins the auction.
To make the point, a $500,000 tax-assessed property may sell at auction for only 20-30 cents on the dollar, that’s $150,0000.
What is a tax overage? If the property is sold at auction to the highest bidder, it’s entirely possible that the property, if it’s an expensive one, could be in a good neighborhood.
Assuming the property sold at $150,000 and had a tax-assessed value of $500,000, the new buyer paid considerably more than the back taxes if the taxes were only $25,000.
As you can see above, the new buyer paid $125,000 over the tax bill. The tax collector has now collected $25,000 in taxes, and there is a $125,000 overage. This could happen on dozens of properties at auction.
Who Gets the Tax Sale Overage?
The taxes have now been paid, and the big question is, who gets the $125,000 overage? The county keeps a tax overage list of all those people that lose a property and the new bidder pays more than the tax defaulted amount.
I do not have memory of every state and county In the United States. However, I do know that the state of New York and the state of Michigan keep this overpaid money and use it for whatever they want.
Generally, the overage stays with the county until it is claimed. In many states, the property owner could do something about that if they so desired. However, most owners are probably unaware that they could claim the overage and don’t show up.
If enough time passes without the overage being claimed, the funds will escheat to the county.
It’s my understanding there are companies that obtain tax overage lists and specialize in helping the former property owners recover this money. They advertise on the internet and elsewhere.
Note that I’m not giving you legal advice, this is all information you can find at the local county. I’m just pointing out a few highlights. You can and should read the local statutes and auction rules of your state and county for clarification.
We hope you enjoyed Ted’s lesson, “What is a Tax Overage List?”
A tax overage list is a list of properties that sold for more than the amount of the unpaid back taxes at a tax delinquent property auction.
Generally, counties will hold onto the overage money until it is claimed by the tax delinquent real estate owner who lost the property. If the money goes unclaimed for a long enough period of time, the funds will escheat to the county.
In some states, the county will keep the overage, and the tax delinquent property owner has no claim to it. Check the local statutes to find out what happens to tax sale overages in your county.
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Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.