Michigan Tax Foreclosure Surplus Funds: How to Claim Your Money After Auction (Rafaeli Ruling)

If your Michigan home was foreclosed for unpaid property taxes and sold at the county auction, you may be entitled to thousands of dollars in surplus funds. Most former Michigan homeowners do not know this, and they miss the strict deadline to file a claim. This guide explains exactly what surplus funds are, how the 2020 Michigan Supreme Court Rafaeli decision changed the law, the specific steps to file your claim, and the deadlines you cannot miss.

What Are Surplus Funds?

When the Foreclosing Governmental Unit (typically the county treasurer) sells your foreclosed property at the August or September tax auction, it often sells for more than the back taxes, fees, and interest that were owed. The difference between the auction sale price and the total amount owed is called the surplus.

Example: you owed $8,000 in back property taxes, fees, and interest. The county auctioned the property and the winning bid was $45,000. The surplus is $37,000. Under current Michigan law, that surplus belongs to you, the former owner.

The Rafaeli Decision: A Game Changer for Michigan Homeowners

Until 2020, Michigan counties kept all the auction proceeds, including any surplus over what was owed. Former homeowners got nothing. In Rafaeli, LLC v. Oakland County (decided July 17, 2020), the Michigan Supreme Court ruled that this practice was an unconstitutional taking under Article X, Section 2 of the Michigan Constitution.

The court held that the foreclosing government must return surplus proceeds (above the tax debt and reasonable costs) to the former owner. This decision applied retroactively in some cases. The Michigan Legislature codified the new rule in MCL 211.78t, which took effect in December 2020.

Who Can Claim Surplus Funds?

You can file a claim if you were the legal title holder of the property at the time of foreclosure, your property was sold at auction for more than the tax debt owed, and you file within the strict statutory deadlines. Heirs of a deceased former owner can also file. Mortgage holders and other lien holders may have priority claims that are paid before the former owner share.

The Strict Filing Deadlines

Missing the deadline forfeits your claim entirely. Mark these dates carefully.

Step 1: File a Notice of Intent to Claim by July 1

Within the same year your property was foreclosed (typically the year following March 31 foreclosure judgment), you must file a Notice of Intent to Claim with the Foreclosing Governmental Unit by July 1. This is a single-page form that puts the county on notice that you intend to pursue surplus proceeds.

Step 2: File the Actual Claim After the Sale

After the county auctions the property (typically August or September), you have until early the following year to file the formal claim and supporting documentation. Specific dates vary slightly by county. Wayne County and Oakland County have detailed timelines on their treasurer websites.

How to File Your Claim

Step 1: Get the Notice of Intent Form

Download Form 5743 (Notice of Intention to Claim Interest in Foreclosure Sales Proceeds) from the Michigan Department of Treasury website, or pick up a copy from your county treasurer office. Some counties have their own version of the form.

Step 2: Submit by July 1

Mail or hand-deliver the completed form to the Foreclosing Governmental Unit (usually the county treasurer) by July 1. Keep proof of delivery. Send by certified mail with return receipt for safety.

Step 3: Wait for the Auction to Complete

The county auctions the property in August or September. After the auction, the county determines whether there were surplus proceeds and notifies all parties who filed Notices of Intent.

Step 4: Submit the Formal Claim with Documentation

Within the deadline set by the county (typically by early the following year), submit the formal claim with: proof of your prior ownership (deed copy from county records), proof of identity, your current contact information, and any documentation showing other lien holders or claimants.

Step 5: Court Hearing (If Required)

Some counties require a court hearing to determine the rightful claimant, especially when multiple parties claim the surplus. The court reviews evidence and orders distribution.

How Much Money Are We Talking About?

Surplus funds vary widely. Some Wayne County tax foreclosure auctions in Detroit have produced surpluses ranging from a few hundred dollars to over $100,000 per property. Recent Michigan auctions have generated millions of dollars in total surplus that former owners have a right to claim. Many properties bought for $5,000 to $20,000 owed sell for $50,000 to $200,000 at auction in stronger markets.

Common Mistakes That Forfeit the Claim

Not filing the Notice of Intent by July 1 (this forfeits the claim entirely)
Filing in the wrong year (the deadline is the year of foreclosure, not later)
Sending the form to the wrong office (must go to the Foreclosing Governmental Unit, usually county treasurer)
Not keeping proof of delivery
Giving up after the first paperwork hurdle
Paying scammers who promise to file the claim “for you” for a large fee (you can file directly for free)
Failing to update your contact information after foreclosure (the county cannot reach you)
Not documenting your ownership chain (especially for inherited properties)

Watch Out for Surplus Funds Recovery Scams

After Rafaeli, a flood of recovery companies and “consultants” started contacting former Michigan homeowners offering to file the claim for a 30 to 50 percent fee. These companies are typically not necessary. The form is one page. The county treasurer office will help you file at no cost. Michigan Legal Help offers free guidance. Do not give away half of your money to a recovery service when you can file the claim yourself in an afternoon.

What If I Already Lost Surplus Funds From a Previous Foreclosure?

Some pre-Rafaeli foreclosures may still be eligible for relief through class action settlements or special legislation. The Pacific Legal Foundation and several Michigan law firms have pursued these cases. Consult a Michigan attorney experienced in tax foreclosure if your foreclosure happened before 2020.

How to Avoid Tax Foreclosure in the First Place

The best way to keep your equity is to avoid foreclosure entirely. Options include payment plans (Wayne County IRSPA reduces interest from 18 percent to 6 percent), the Pay As You Stay program for low-income homeowners, the Michigan Homeowner Assistance Fund (MIHAF) for COVID-impacted homeowners, and selling the home for cash before the March 31 foreclosure deadline. A cash sale to Offer Now Michigan can close in seven to 14 days, paying off the back taxes at closing and putting the equity in your pocket — without the auction discount or the claim-filing process.

Get Help Before Your Property Is Foreclosed

If your property tax delinquency is heading toward foreclosure, call us at (810) 547-1135 for a no-obligation cash offer. We can typically close before the March 31 foreclosure date, paying off the back taxes and giving you the remaining equity directly — no claim filing, no auction discount, no Notice of Intent deadline.