How to Start a Surplus Funds Business in 2026 (Step-by-Step)

Starting a surplus funds business is not complicated. But it is not easy either. If someone tells you it is passive income or a magic loophole, they are selling you something. This guide walks through the real steps, in plain language, so you know what the work actually looks like before you start.

I have been doing this since 2013. I have worked more than 2,000 cases and helped recover over $100M for foreclosure victims across the country. Nothing here is theory. This is the same process I still use today.

Surplus funds show up after a foreclosure auction or a tax sale. A property sells at auction for more than what was owed on it. The difference is the surplus. That money does not belong to the bank. It does not belong to the county. It belongs, first, to the person who used to own the property. Most of the time that person has no idea the money exists. Nobody is required to call them and tell them. That is where a surplus funds business comes in. You find the person the money belongs to, help them file the paperwork to claim it, and get paid a percentage when they get paid.

Here is the real step-by-step process, not a six-bullet outline.

Before you contact a single person, you need to understand the rules in the state you plan to work in. This is not optional and it is not the same everywhere.

A few things are true almost everywhere: surplus funds come from foreclosure auctions (mortgage foreclosures) and tax sales (property sold for unpaid taxes). The former owner of the property has the first legal right to the money, ahead of almost anyone else, as long as they file a claim in time. A recovery agent works on a contingency fee -- you get paid a percentage of what is recovered, and only if the claim succeeds. The homeowner pays nothing upfront.

But the details change a lot by state, and this is where beginners get hurt. Some states let the former owner file a simple claim form directly with the county or court, no lawyer needed. Some states route surplus claims through a court process instead, like North Carolina -- under N.C. Gen. Stat. Section 45-21.31, if the trustee can't clearly determine who's entitled to the surplus, or someone disputes it, the money goes to the clerk of superior court instead of being paid out directly. Some states cap the percentage a recovery agent can charge -- Florida is the clearest example: under Florida Statute Section 45.033, a non-attorney transferee or assignee's total compensation cannot exceed 12 percent of the surplus recovered in a mortgage foreclosure case, and the agreement must include a disclosure that the homeowner doesn't need a recovery agent at all. Tax sale rules are a separate set of statutes from foreclosure rules, even in the same state -- Texas handles excess proceeds from tax sales under Tax Code Section 34.04, with its own filing process and deadline.

The point is simple. You cannot assume your state works like the last state you read about. Look up your target state's specific rules on filing requirements and fee limits before you contact anyone. This site has real, cited state-by-state guides that break this down further.

In this business, a lead is a specific person who is owed surplus funds from one specific, recorded sale. Not a general homeowner. A named person, tied to a case number, with a dollar amount sitting somewhere waiting to be claimed.

These leads come from county excess funds or surplus funds lists (often published as a PDF or spreadsheet by the tax collector, treasurer, or clerk of court), tax deed sale records held by county tax collector or auditor offices, and foreclosure auction and court records held by the clerk of court.

Not every name on a list is usable. Vetting means confirming three things first: the amount is real and current (lists can be outdated, and amounts get reduced by fees, liens, or partial disbursements), you have the right person (heirs or lienholders can have a competing claim), and there is still time to file (every state and county has a deadline, and money not claimed in time can get sent to the state as unclaimed property or kept by the county). Skipping this step is how people waste weeks calling names attached to money that is already gone.

Most people on your lead list do not still live at the address tied to the foreclosure or tax sale. That's often the whole reason the money is sitting unclaimed.

Finding someone's current contact info is called skip tracing -- cross-referencing public records and address history to find a current phone number or address. Do this by hand or with skip tracing tools, but don't skip it. A name and an old address is not a workable lead.

Once you have a real number, outreach starts. Be ready for this part to be hard -- you're calling a stranger about money from a foreclosure or tax sale years ago, something painful they may not want to revisit. Some will assume it's a scam. That's normal, not a sign you're doing it wrong. A good phone script gets you through the first ten seconds honestly: who you are, why you're calling, what the money is, and that there's no cost to them unless you help them recover it.

Once someone agrees to work with you, you need a written agreement before doing anything else on their behalf. In plain terms, this is a contingency fee agreement: you get paid a percentage of the money recovered, only if the claim succeeds, and the homeowner pays nothing out of pocket.

This is not a handshake deal. It needs to be in writing, and in some states the law is specific about what it has to say. Florida, for example, requires the agreement to disclose the sale price, the surplus amount, and a plain statement that the homeowner doesn't need a recovery agent or attorney to claim the money themselves (Florida Statute Section 45.033). Every state can have its own requirements, so don't freehand a template without checking your state's rules. This is not legal advice on how to draft that document -- talk to someone who knows your state's requirements before you send a homeowner anything to sign.

This step looks different depending on where the property was located, and it's one of the biggest reasons this business isn't 'simple.' In some states, the claim is a form filed directly with the county or clerk of court. In others, like North Carolina, it runs through a formal court petition when the trustee can't determine who's entitled to the money or someone disputes it (N.C. Gen. Stat. Section 45-21.31). Some tax sale claims, like in Texas, go through their own separate statute and court process (Tax Code Section 34.04).

Timelines vary just as much. Some counties process a clean, uncontested claim in weeks. Others take many months, and complicated cases can take well over a year. Don't promise a homeowner a fast timeline -- be honest that it depends on the state, county, and whether anyone is contesting the funds.

Once a claim is approved, the court or county issues payment. If an attorney was involved, their fee is often deducted before the remaining funds are split between the homeowner and the recovery agent, depending on the agreement. Exactly how disbursement works depends on the state and the office holding the funds.

After your first few deals, growth comes down to volume and geography -- more leads, more counties, more states, each with its own rules to learn. This isn't a business that scales by luck. It scales because you build a repeatable process for sourcing leads, vetting them, skip tracing, outreach, and filing, then run that process in more places.

These are the mistakes that trip up almost everyone who starts without a real process:

Not checking state-specific rules before contacting anyone. Assuming your state lets you file a simple form when it actually requires an attorney and a court hearing, or assuming there's no fee cap when there is one, can put your whole deal at risk.

Contacting homeowners without a compliant written agreement ready. Verbal promises aren't enough, and using the wrong document in a disclosure-heavy state can make the agreement unenforceable.

Ignoring filing deadlines. Miss the window and the money can be sent to the state as unclaimed property or absorbed by the county.

Assuming every state works the same way. What's true in Florida isn't true in North Carolina. Treating this as one national rulebook instead of fifty different ones is one of the fastest ways to make a compliance mistake.

Working stale or unverified lists. Confirm the amount, the rightful claimant, and the deadline before you invest time in outreach.

Trying to do everything manually with no system. Skip tracing, tracking deadlines across counties, and managing agreements by hand doesn't scale past a handful of leads.

This is real work. It takes research, honest conversations, and attention to legal detail state by state. If you want to see the full process laid out live, that's exactly what I walk through in the free masterclass.