In the complex realm of real estate law, we at The Farah Law Firm, P.C. serve as your dedicated guide, especially when the convoluted matters of tax lien foreclosure and excess proceeds are at play.
Investor Opportunity in Excess Proceeds in Texas
Excess proceeds emerge from the ashes of tax lien foreclosures. These are funds left behind after fulfilling all the obligations related to the lien and foreclosure costs and subordinate lien holders. Interestingly, the law upholds the former owner’s right to claim these funds, thus providing a chance to recover some of their lost investment.
Regulations in Texas for Assignment and Transfer
Given the potentially large amounts of excess proceeds and the financial stress the former owners might be experiencing, it opens a lucrative avenue for astute investors. By securing the assignment or transfer of claims to these excess proceeds, investors can reap significant financial rewards. But, as with most high-return opportunities, inherent risks accompany this prospect. The Texas Tax Code requires an investor in excess proceeds pay the assignor AT THE TIME OF THE ASSIGNMENT. Also, the Code essentially limits the rate of return an investor can make to 25% under subsection (j) whereby, “The amount of the excess proceeds the court may order be paid to an assignee or transferee may not exceed 125 percent of the amount the assignee or transferee paid the assignor or transferor on the date of the assignment or transfer”.
The legal landscape surrounding the assignment or transfer of excess proceeds is defined by the Texas Tax Code Section 34.04(f) A person may not take an assignment or other transfer of an owner’s claim to excess proceeds unless: (1) the assignment or transfer is taken on or after the 36th day after the date the excess proceeds are deposited in the registry of the court; (2) the assignment or transfer is in writing and signed by the assignor or transferor; (3) the assignment or transfer is not the result of an in-person or telephone solicitation; (4) the assignee or transferee pays the assignor or transferor on the date of the assignment or transfer an amount equal to at least 80 percent of the amount of the assignor’s or transferor’s claim to the excess proceeds; and (5) the assignment or transfer document contains a detailed sworn statement by the assignor.
Risks of Non-Compliance and Role of The Farah Law Firm, P.C.
While the potential for profit is undeniable for investors who are clever at scouring county data records, the path to it calls for strict adherence to the set of requirements prescribed by the Texas Legislature. This includes precise time-bound rules for the assignment or transfer, defined limitations on the fee to be paid, and detailed instructions concerning the documentation process.
Non-compliance with the Texas Tax Code can lead to the unscrupulous investor having to payback the excess proceeds, plus attorney’s fees and expenses under subsection(g), “An assignee or transferee who obtains excess proceeds without complying with Subsection (f) is liable to the assignor or transferor for the amount of excess proceeds obtained plus attorney’s fees and expenses.”
We at The Farah Law Firm, P.C. advocate for a prompt initiation of the process, as time is of the essence. Missing deadlines could lead to forfeiture of the excess proceeds. With our comprehensive knowledge and seasoned experience, we are prepared to guide you through this labyrinth of legalities, ensuring every step taken is in alignment with the law.
Entering the realm of excess proceeds is navigating a labyrinth, fraught with legal complexities and potential pitfalls. However, as your guide, we can provide the compass to successfully maneuver through these intricate and detailed requirements, which in many instances differ from county to county in Texas, and even Judge to Judge since many of the smaller counties rarely see these types of cases.
Frequently Asked Questions
Excess proceeds are the funds left after all obligations from a tax lien foreclosure sale have been met.
Yes, the law upholds the former property owner’s right to claim these funds.
Investors can realize significant financial rewards by properly securing the assignment or transfer of claims to these excess proceeds.
Non-compliance can lead to substantial financial and legal liabilities, including the payment of excess proceeds and attorney’s fees.
We provide comprehensive legal guidance throughout the process, ensuring adherence to all stipulations, thereby maximizing potential profits and minimizing risks.