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Excess Proceeds From Texas Tax Sales

Everyone · Updated 2026-10-16

Excess Proceeds From Texas Tax Sales

Information, not legal advice. Laws change; check the current statute or rule and talk to a Texas attorney before you act.

When a Texas tax-sale property sells for more than what is owed under the judgment, the extra money does not go to the taxing units or the buyer. It is excess proceeds (often called "overages" or "surplus"), and it is held by the clerk of the court for people with a claim to it, usually the former owner or a lienholder. Texas has some of the tightest rules in the country on who can help owners get this money and what they can charge.

Where the money comes from

After a tax sale, the officer pays the sale costs, the court costs, the taxing units' expenses and the amounts in the judgment, in a fixed order. Anything left is excess proceeds, which the officer pays to the clerk of the court that issued the order of sale (Tax Code §34.02). If the property was struck off to a taxing unit for the judgment amount, there is no excess.

The U.S. Supreme Court held in Tyler v. Hennepin County (2023) that a government that keeps the surplus from a tax sale beyond the debt owed takes property without just compensation. Texas law already sends the surplus to the court for claimants, so the case mainly matters in states that did not.

The notice to the former owner

If the excess is more than $25, the clerk must send the former owner written notice within 31 days after receiving the money (by a delivery method allowed by Texas Rule of Civil Procedure 21a). The clerk holds the money for two years after the sale, unless the court orders otherwise (§34.03(a)). Harris County's District Clerk says it sends that notice by certified letter.

If no one establishes a claim in that time, the clerk distributes the money to the taxing units in the sale, in proportion to what each was owed (§34.03(b)). So the deadline is real.

Who can claim, and in what order

Any person, including a taxing unit, may file a petition for excess proceeds before the second anniversary of the sale. It can be filed in the same tax-suit cause number (§34.04(a)). A copy must be served on the other parties at least 20 days before the hearing (§34.04(b)).

If more than one person claims, the court pays in this order (§34.04(c)):

  1. the tax-sale buyer, if the sale was voided and the buyer won a judgment;
  2. a taxing unit, for later taxes, penalties and interest, or omitted amounts;
  3. other lienholders, in the order of their lien priority, such as a mortgage lender;
  4. a taxing unit, for amounts left unpaid from the original judgment;
  5. the former owners who were defendants in the suit (and certain relatives and heirs).

A person who bought an interest in the property after the judgment generally can't claim, unless related within the third degree or an heir (§34.04(c-1)). No interest or costs are allowed on the claim (§34.04(d)). The court's order is appealable (§34.04(e)).

Practical point: a former owner with a mortgage may find that most or all of the excess goes to the mortgage lender, who ranks ahead of the owner.

The fee limits: why the "surplus recovery" model barely works in Texas

In many states, "surplus recovery" companies find former owners and sign them to a contingency fee of a third or more. Texas restricts this sharply.

RuleSource
A non-attorney may not charge any fee to obtain excess proceeds for someone else§34.04(i)
An attorney's fee is capped at 25% of the amount obtained or $1,000, whichever is less§34.04(i)
A former owner's claim may be assigned or sold only if: it is done no earlier than the 36th day after the money is deposited; it is in writing and signed; it is not the result of an in-person or telephone solicitation; the buyer pays at least 80% of the claim on the assignment date; and a sworn affidavit with the required facts accompanies it§34.04(f)
The court may pay an assignee no more than 125% of what the assignee paid§34.04(j)
An assignee who collects without meeting these rules is liable to the owner for the proceeds, plus attorney's fees and expenses§34.04(g)
The assignee must attach the assignment to the petition and produce the original at the hearing, with proof of payment§34.04(h)

Example (made-up numbers). The registry holds $20,000 for a former owner with no other claims. An attorney could charge no more than $1,000. A buyer of the claim would have to pay the owner at least $16,000 up front, by a written offer that did not start with a phone call or door knock, and could recover no more than $20,000 (125% of $16,000 is $20,000).

The result: the only clearly legal paid roles are attorneys at a capped fee, and claim buyers who pay at least 80% and solicit in writing only, for a gross return of 25% at most.

How a former owner claims without help

Many owners can claim on their own:

  1. Find the cause number from the tax suit or the clerk's notice.
  2. Ask the district clerk (or county clerk, depending on the court) for the amount held. Harris County's District Clerk takes requests by email to its court registry, subject to fees.
  3. File a petition in that case, with proof of ownership and identity, and serve it on the other parties.
  4. Get a signed court order naming the payee, address and amount. Harris County says it needs exactly this to release funds.

Law libraries, such as the Harris County Law Library, can help with forms.

Why investors watch excess proceeds

Any outreach to a former owner about the claim itself must follow §34.04(f). Telephone and in-person solicitation of an assignment is off the table.

How this shows up in Agentix Data

Agentix Data does not carry court-registry excess-proceeds balances. We carry the steps that lead there: delinquent tax rolls and tax-suit status for the counties we cover, and posted Texas tax-sale listings with cause numbers and minimum bids, which you can use to look up the case with the clerk.

Sources

General information, not legal or financial advice.