Texas Excess Proceeds Explained: How Families Can Claim Money After a Foreclosure — Even When the Owner Is Deceased

Most people believe that when a home is foreclosed on, everything connected to it is gone forever.

That belief costs Texas families millions of dollars every year.

In reality, when a property in Texas is sold at foreclosure or tax sale, the story doesn’t always end at the auction. In many cases, money is left over — and that money legally belongs to the homeowner or their heirs.

These funds are called excess proceeds or surplus funds.

This article explains how excess proceeds work in Texas, who is entitled to them, and what happens when the original homeowner has passed away.

What Are Excess Proceeds in Texas?

Excess proceeds are created when a foreclosed or tax-sold property sells for more than what is owed.

Here’s a simple example:

• Property sells at auction for: $185,000

• Total owed (mortgage, taxes, fees): $132,000

• Excess proceeds: $53,000

That $53,000 does not belong to the bank or the county.

Under Texas law, it belongs to the former owner — or, if the owner is deceased, their estate or legal heirs.

Why Most Families Never Know the Money Exists

There are three main reasons excess proceeds go unclaimed:

1. No automatic notification

   Counties and trustees are not required to track down heirs.

2. Mail goes to the foreclosed property

   If the owner passed away or the family moved, notices are often never seen.

3. Grief delays action

   Families are focused on funerals, probate, and loss — not legal deadlines.

By the time families learn about the funds, the clock may already be running out.

What Happens When the Homeowner Is Deceased?

This is where confusion — and mistakes — usually happen.

When the homeowner has passed away:

• The excess proceeds become part of the estate

• The right to claim transfers to:

  • Named beneficiaries

  • Legal heirs

  • An executor or administrator

The bank cannot keep the money simply because the owner died.

But Texas does require proof of authority to release the funds.

Do Heirs Always Need Probate to Claim Excess Proceeds?

Not always — and this is a major misconception.

Depending on the situation, claims may be made using:

• Small Estate Affidavit

• Heirship Affidavit

• Letters Testamentary or Letters of Administration

• Court order (in contested cases)

Each case is different, and filing the wrong paperwork can delay or even jeopardize a claim.

Important Deadlines Most People Miss

Excess proceeds are not held forever.

If funds are not claimed within the allowed time:

• They may be absorbed by the county

• Transferred to the state

• Or become significantly harder to recover

Waiting “until things settle down” after a death often works against families.

Why Families Are Often Approached by Strangers

If you’ve lost a loved one and suddenly receive calls, letters, or messages about “money owed,” you’re not imagining things.

Public foreclosure records make it easy for third parties to see:

• Auction results

• Sale prices

• Potential surplus

Some outreach is legitimate. Some is not.

Understanding how excess proceeds actually work is the first layer of protection against scams and bad advice.

The Most Important Thing to Know

Excess proceeds are not a loophole. They are your legal right under Texas law.

But claiming them requires:

• Correct identification of heirs

• Proper documentation

• Timely filing

• And an understanding of the foreclosure process itself

For families already dealing with loss, that complexity can feel overwhelming — which is why so much money goes unclaimed.

Final Thought

If a loved one’s Texas property was foreclosed on — recently or years ago — it is worth verifying whether excess proceeds exist.

Not because of hope. Not because of speculation.

But because the law already recognizes those funds as belonging to the family.