More Americans are discovering potential windfalls from past property losses, a significant shift reshaping the landscape of tax foreclosures. A bombshell Supreme Court decision has opened the door to a financial second chance for thousands of Americans who lost their homes to tax foreclosure sales – and it all hinges on previously unknown assets now waiting to be claimed.
Tax Foreclosure Overage Claims: Real Estate Developments
The U.S. Supreme Court's decision in Tyler v. Hennepin County, issued on May 25, 2023, has set a new precedent across the country. The ruling decree is clear: excess cash from tax foreclosure sales must be returned to the original property owners, and governments can no longer keep the extra funds for themselves. Thanks to this landmark decision, the old way of doing things—where local governments controlled the purse strings for these sales—is no longer the case.
This radical shift in policy is a beacon of hope, says Jane Smith, a property law professor at State University, for the many innocent people who've fallen victim to crippling tax foreclosures. By doing so, individuals may find themselves eligible for recoveries of enormous proportions, with sums often in the tens or hundreds of thousands.
The Process:
- Properties sold at tax auctions often fetch more than the owed taxes
- The difference between the sale price and tax debt is the “overage.”
- Former owners can claim these overages, but many are unaware of this right.
For example, if a home with $10,000 in unpaid taxes sells for $150,000 at a tax auction, the former owner could claim $140,000 in overages.
This situation has given rise to a new business model: companies specializing in locating former property owners and assisting them in claiming their funds. Often led by attorneys or real estate professionals, these firms operate contingently, taking a percentage of recovered funds as payment. Fee industry standards range from 30% to 50% of the recovered amount.
Bob Diamond, an attorney and self-proclaimed expert in the overages business, explains, “We're connecting people with money they didn't know they had. It's a win-win situation – we only get paid if we successfully recover funds for our clients.”
The impact of this trend extends beyond individual homeowners. Local governments, which previously retained these funds, are now adapting to the new legal landscape. Some jurisdictions, like King County in Washington State, proactively notify former owners, while others update their procedures to comply with the ruling.
Mark Johnson, a county treasurer in Michigan, notes that they are revising the entire tax foreclosure process. Stripped of all complexity, our goal is simply to be fair and law-abiding in our actions.
What's emerging is a profound understanding of how property, legislation, and personal wealth overlap. For those who've experienced a tax foreclosure in recent years, it may be worth investigating whether unclaimed funds exist.
Experts advise individuals to:
• Check with local tax authorities about potential overages
• Be cautious of unsolicited offers for overage recovery services
• Consult with a legal professional before entering into any agreements
• Consider seeking assistance from legal aid organizations for low-cost help
The potential for recovery is significant. In Wayne County, Michigan alone, officials report over $16 million in unclaimed surplus funds from tax foreclosures between 2017 and 2019. Nationwide, the total could be hundreds of millions.
With every new development, opportunistic entrepreneurs and would-be claimants spotlight a corner of real estate law that was once largely overlooked. How this will reshape the aftermath of tax foreclosures in the long term remains to be seen.
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