Alabama Surplus Funds: How Former Homeowners Can Claim What's Rightfully Theirs

If your property in Alabama was recently foreclosed upon or sold in a tax sale, you might be entitled to "surplus funds." These are the excess proceeds remaining after the mortgage or tax debt, along with all associated fees and costs of sale, have been paid. It's a common misconception that once a property is sold, everything is settled. However, if the sale price exceeded the total amount owed, that extra money doesn't automatically go to the lender or tax authority; it should go back to the former homeowner.

Here's how to determine if you have surplus funds in Alabama and the steps to take to claim them.

Understanding Surplus Funds in Alabama

In Alabama, the process for handling surplus funds from a foreclosure sale is outlined in state law. Specifically, Ala. Code § 6-8-100 addresses the distribution of proceeds from a mortgage foreclosure sale. In essence, after the costs of sale are covered and the debt secured by the mortgage is paid, any remaining funds are considered surplus. This surplus should then be paid to the mortgagor (the former homeowner).

Similarly, for tax sales, if the property sells for more than the taxes, penalties, interest, and costs, the excess funds are generally held for the benefit of the former owner. While the specific statutes for tax sale surplus can be more complex and involve different timelines, the underlying principle is the same: the former owner has a right to the remaining money.

How to Determine if You Have Surplus Funds

The first step is to investigate the details of your property's sale. This requires a bit of detective work, but the information is public record.

1. Review the Foreclosure or Tax Sale Records

• Foreclosure Sales: Contact the attorney who handled the foreclosure or the trustee. They are often responsible for calculating the final payoff and distributing funds. You can also check the probate court records in the county where the property is located. Foreclosure deeds and related documents are filed there and will show the sale price.
• Tax Sales: For tax sales, you'll need to check with the county probate court or the county's revenue commissioner's office. They will have records of the tax sale, including the amount for which the property sold and the outstanding tax liability.

Look for the final sale price and compare it to the amount of the debt (mortgage balance or outstanding taxes) plus all sale costs, late fees, interest, and attorney's fees. If the sale price was higher, surplus funds likely exist.

2. Check with the Custodian of Funds

Often, the excess funds will be held by a trustee, the foreclosing attorney, or the clerk of the court in the county where the property is located. Don