Who Gets the Money?

Posted September 23rd, 2007 by Joe Kaiser

Dear Rob,

No, I’m not going to continue with the Abbot and Costello take off from the earlier post, Who’s in First, but I do want to give you something to think about.

Tax sale overages. Have you got them figured out yet?

I wonder.

In the upcoming sale

Mandy has a problem.

Not only is she behind on her mortgage, she’s now three years behind on her property taxes and wouldn’t you know it, she’s in the upcoming tax sale.

She’s known for awhile there’s little hope of saving her property, an old mobile home on a half acre parcel she bought at the top of the market just a few years ago. She’d love to keep it, but it’s more than she can handle.

The numbers look like this (rounded) . . .

Actual, real world market value – $100,000.

First mortgage principal balance – $90,000.

Amount to bring loan current – $10,000.

Delinquent property taxes – $10,000.

See the problem here?

less than zero

When you add what she owes on her loan and all the delinquencies and back property taxes, she actually owes $110,000. That’s $10,000 more than her property is worth.

She’s accepted there’s little she can do but ride it out, and she knows there’s no possibility of selling unless she can somehow get the bank to do a short sale.

With the little time that remains, it’s not likely.

And sure enough, the bank doesn’t want to cooperate in a short sale and tells her they’ll be paying the property taxes to avoid being wiped out themselves.

She’s happy, because this gives her another six months of free rent (it will take the bank that long to do their own foreclosure).

Snowed in

But the day before the tax sale, the plane carrying the guy with the certified check to pay the county treasurer gets stuck in a North Carolina snow bank (true story, that part anyway).

And the county treasurer confirms with me after the 4:30 deadline that Mandy’s property is in tomorrow’s sale. Incredibly, none of the local branch offices are willing to step up and fund the delinquent tax payment so time runs out for the lender.

Overage Happens

As expected, there’s bidding activity at the sale.

Not surprisingly, Mandy’s property is the only house in the sale (houses almost always get cured), making it the focus of the sale.

Lots of bidding takes place and the property sells for $90,000, all cash (of course).

Seems that investors are willing to pay far more than they probably should at these kinds of sales, making it not uncommon for properties to sell near retail, or more.

Every dollar of it!

Who gets the money?

The county has $90,000 in its pocket from the sale, and so it takes the $10,000 it’s owed and the property tax delinquency is off its books, paid in full.

And the remaining $80,000?

It is parked with the county and stays there unless someone applies for it. And who is the only person, according to your office, entitled to claim those funds?

After taxes are paid from the sale price, there may be substantial money left over. State law says that such a surplus rightfully belongs to the person who owned the property.— Assistant Attorney General David Huey

Mandy gets the money, David?


You’re kidding, right?

Nope, not hardly.

You’re telling me she gets the whole 80 grand, even though she had no equity in the property and owed that bank even more than that?

Pretty much. It’s the law.

That doesn’t seem a little ridiculous to you?

What can I tell you? Like I said, it’s the law.

“Upon Application”

It’s all part of the overage game.

In our state, Mandy is entitled to walk up to the counter with her completed application and walk out of the county finance office with a check for $80,000.

Yes, this is the very same Mandy who hadn’t paid her mortgage or her property taxes and who owed $10,000 more than her property was worth 10 minutes ago.


Because sometimes Mandy never bothers to apply.

Cherry flavored

The law is more than goofy, it’s insane.

And you can be sure the intent of the legislature was not to have Mandy unjustly enriched by failing to pay her mortgage and property taxes.

The county hopes Mandy never shows up to claim the money so they are entitled to keep it for themselves. That’s the sole intent of the law, by the way, to facilitate escheating funds.

It’s not to protect Mandy from creditors intercepting her money, as they’ve have you believe. It’s to “protect” counties from rightful creditors “intercepting” the money before it can escheat to county coffers.

Gimme a break.

And if you believe anything different, you’ve drank the kool-aid.

How much actually escheats to Washington counties through unclaimed tax sale overages?

I think it’s time we find out. Don’t you?

In the arena,

Joe Kaiser

3 Responses to: “Who Gets the Money?”

  1. spyboy responds:
    Posted: September 25th, 2007 at 7:13 pm


    Sounds like a Freedom of Information Act request, for each WA county. They might get the county people to call off the WA Atty. Gen., as he is unwittingly publicizing and informing the public on the scheme.

    Thank You.

  2. JB responds:
    Posted: October 2nd, 2007 at 6:28 pm

    Now your’e getting warm…

  3. Richard Geller responds:
    Posted: March 2nd, 2008 at 7:30 am

    Is she upside down? I don’t see valuation information here. Why work things out on a property that is under water? Negative equity is not a good situation in which to keep paying when it is difficult anyway.


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