Texas Tax Liens vs. Redemption vs. Excess Funds

The 2-Year Rule Most People Get Wrong

If you’ve ever heard someone say “In Texas you have two years to get your property back” or “You have two years to claim the money” — they’re usually half right and half wrong.

And that misunderstanding costs people real equity every year.

Let’s clarify exactly how Texas tax foreclosures work, what the two-year timelines actually apply to, and why redemption rights and excess funds are not the same thing.

This explanation is Texas-specific and reflects how counties like Dallas County actually operate.

First: Texas Does NOT Sell Tax Liens

This is the root of most confusion.

In Texas:

• The county does not sell tax lien certificates

• The county sells the property itself at a tax foreclosure sale

• The buyer receives a Tax Deed, not a lien

This is fundamentally different from states like Florida or Arizona, where investors buy paper (liens) instead of real estate.

After a Texas Tax Sale, Two Separate Rights Exist

Once a property is sold for delinquent taxes, two independent legal rights may exist:

1. The Right of Redemption (property-related)

2. The Right to Claim Excess Proceeds (money-related)

They are not linked, do not extend each other, and often get confused because one of them can last two years.

1. Right of Redemption — Buying the Property Back

This right allows the former owner to repurchase the property from the tax-sale buyer by paying a statutory premium.

How long do you have to redeem?

It depends on the property type:

• Homestead or Agricultural property→ 2 years

• All other property types→ 180 days

How much does redemption cost?

The former owner must pay:

• The tax sale purchase price

• + 25% penalty if redeemed within the first year

• + 50% penalty if redeemed in the second year (homestead/ag only)

• recording and allowable costs

That premium is paid to the investor, not the county.

Redemption is about getting the property back, not reclaiming equity.

2. Right to Claim Excess Proceeds — Recovering Equity

Excess proceeds are created when a tax foreclosure sale brings in more money than what was owed in taxes, penalties, and costs.

That extra money does not go to the buyer.

It is held by the county and can be claimed by:

• The former owner

• Heirs

• Certain lienholders (in priority order)

How long do you have to claim excess funds?

• Up to 2 years to file a claim in most Texas counties

Key facts about excess funds:

• Claiming them does not restore ownership

• You do not need to redeem the property to claim them

• You can miss redemption entirely and still recover your equity

Excess funds are about money, not property.

The Critical Mistake People Make

Many owners assume:

“If I missed redemption, I lost everything.”

That is false.

Redemption and excess proceeds are separate legal paths.

You can have:

• ❌ Redemption expired

• ✅ Excess proceeds still sitting with the county

This happens every week in Texas.

Side-by-Side Comparison (Texas Tax Sales)

Topic	Redemption	Excess Proceeds
Purpose	Buy the property back	Recover leftover equity
Who pays	Former owner → Investor	County → Claimant
Timeline	180 days or 2 years	Up to 2 years
Penalty / Interest	25% / 50%	None
Affects ownership	Yes	No
Requires court filing	No	Yes

Why This Matters (Especially for Heirs)

Tax foreclosures often involve:

• Deceased owners

• Unopened probate

• Heirs who never received notice

• Families who assume everything was lost

In reality:

• The property may be gone

• The equity is not

• Funds are frequently sitting unclaimed with the county

Understanding this distinction is the difference between:

• Walking away empty-handed

• Or recovering tens of thousands of dollars

Bottom Line

• Texas does not sell tax liens — it sells deeds

• The 2-year redemption period applies only to homestead/ag properties

• The 2-year excess funds window applies to money, not ownership

• Missing redemption does not mean equity is gone

If a Texas property was sold for taxes, there may still be value on the table — even years later.

Education is the first step to recovery.