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As a tax attorney, I have worked on several cases when people failed to pay property taxes and had to face the foreclosure process.
Most states have a timeline to protect property owners from such drastic measures, but it is best to stay on top of your taxes before they become an issue.
To understand how exactly this process works, please read below.
- If you neglect to pay your property taxes, the county treasurer can place property tax liens against your residence for the amount of unpaid taxes.
- The property owner can dispute their tax assessment and reduce their liability under state and local laws.
- To pay the taxes you owe, submit full payment to the county clerk in accordance with their estimation of redemption.
What Happens During a Tax Sale?
What happens during a tax sale depends on which state you are in. Depending on the state laws and procedures governing it, the taxing authority can decide to sell the property or just its corresponding lien.
If they choose to do so, the buyer might be able to foreclose and take possession of your house or use other legal methods for obtaining ownership - all through what is known as a tax sale process .
The tax sale process typically involves the following steps:
1. The County Will Notify You Via E-Mail
The county will alert taxpayers that their taxes are overdue or "delinquent" by sending them a notification with the amount of taxes owed.
The past due notice usually contains an expiry date, warning taxpayers to pay up before it expires; failure may lead the collector to publicize its intention of auctioning your unpaid tax debt.
If you believe that, due to your income level, age, or disability status, certain tax exemptions should have been granted to you, file certificates of error with the county collector before the time mentioned in the overdue notice.
2. Public Announcement of Delinquent Properties
Afterward, the county tax collector will interject your property in a published list of properties with delinquent taxes in a local newspaper. Additionally, you'll receive official notification via registered or certified mail directly from the county.
3. Tax Sale In Public Auction
If you fail to pay the taxes owed or file for tax certificates of error before the date of the annual tax sale, the tax authority may put up your property for auction in an open market.
4. Redemption Period To Pay Property Taxes
After the county sells your unpaid taxes to a tax buyer, you maintain the right to recover them from the clerk within thirty months (redemption period).
With that said, depending on circumstances, some tax buyers may be willing to provide an extension for you more time for you to pay the unpaid property taxes; however, this is not mandatory and ultimately up to their discretion.
5. Redemption Process Begins
To ascertain the cost to reclaim your taxes, you must apply for an "estimate of redemption" from the county.
While there is usually a small fee of approximately $10, this amount can increase with time; consequently, you should apply before the 30-month grace period expires.
Having studied the many cases before me, I know interest payments, fines, and other administrative costs could be hefty.
6. Tax Lien Sales and Tax Deed Sales
When a property tax lien is placed on a home, the taxing authority (e.g., county) could hold a tax sale. Generally speaking, there are two kinds of these sales: "tax deed sales" and "tax lien certificate sales."
- Tax Deed Sale
In a tax deed sale, the taxpayer is awarded an unequivocal title to the property through purchase from the taxing authority. The buyer receives a clear and full deed that grants ownership of their new home.
However, it might take some time before the purchaser receives the deed to the property. In many cases, a redemption period must pass first for this to happen.
- Tax Lien Certificate Sale
By purchasing a tax lien certificate, the taxing authority will grant it to you. What a tax lien means is that not only can you claim back the original debt and any additional penalties or interest accrued on top of it - but all of these are rightfully yours.
If the homeowner doesn't pay delinquent property taxes before a predetermined deadline, the lien purchaser can initiate foreclosure or other processes to transfer ownership of the certificate.
With an appropriate plan according to their state regulations, this person or group who purchased a tax lien ultimately gains property rights.
- Other Tax Sale Procedures
In some locales, sales are not held, but the government merely takes control of a house by executing its lien.
Regulations in such areas then define how the tax-delinquent property should be disposed of, typically through the sale. In others, however, foreclosure is carried out ahead of any sale involving the taxing authority.
7. Motion of Eviction Is Filed
After procuring a tax deed, the buyer can swiftly file a motion to evict you from your abode in the same case as it did when requesting the tax deed. They don't need to initiate an additional action or serve you with another summons.
"After the delinquent taxes are sold to a tax buyer, you still have the right to redeem the property taxes from the county clerk within 30 months."
- Amanda Insalaco, Borchard Fellow of The Housing Preservation Project
Can You Redeem the Property After the Tax Sales?
Yes, you can redeem the property after the tax sales.
If you're looking for options to avoid the tax sale of a property other than completely paying off its delinquent taxes, here are several methods that could help:
1. Object to the Assessments
Homeowners can dispute their tax assessment and reduce their liability under state and local laws. Generally, these disputes are undertaken on two grounds: either a property's assessed value is too high compared to its taxable worth, or it’s too high compared to other properties within the area.
The taxpayer can claim that their property has been excessively assessed, leading to a higher assessment than neighboring properties. Upon reducing this assessment amount, the homeowner is more likely to settle the property tax debt quickly and efficiently.
2. Seek Abatement, a Deferral, or a Compromise
Across the nation, various exemptions and abatements are available to lessen an individual's overall tax burden. These credits depend on a person's age, disability status, or source of income - for instance, some states offer property tax relief if they can demonstrate financial strain.
Furthermore, certain jurisdictions provide additional aid to those with special circumstances, such as police officers' widows/widowers. It is important to research what programs your state may have in place that you could benefit from.
After a tax sale, the homeowner can pay off their debt and reclaim their property. This is known as "redemption" and involves paying back the entire sum of money spent on the sale and any related costs or interest - all within the time period dictated by law.
Generally, when a house is mortgaged, it will not be put up for tax sale. The mortgage lender or servicer of the property typically pays the necessary property taxes to avoid having their tax lien eliminated via a tax sale.
Can a Mortgage Survive a Tax Sale?
No, a mortgage can not survive a tax sale. The tax authority will wipe out the lender's tax lien if you do not pay taxes.
Property tax liens always precede other forms of debt, such as mortgages and deeds of trust. This means that a tax lien sale completely erases any pre-existing mortgage agreements.
So, loan servicers will often lend money to pay off the delinquent property taxes to protect you from this happening. Of course, they then require repayment from you shortly after doing so.
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Will I Lose My Home If I Don't Pay the Property Taxes?
Yes, you can lose your home if you don't pay the property taxes. If you fail to repay the property taxes, the taxing authority can seize your home and place it up for auction.
What If I Have a Mortgage on the Property?
If you have a mortgage on the property and cannot pay the property taxes, your mortgage company will likely step in and make payments of them on your behalf.
What If I Have Already Lost My Property to a Tax Buyer?
If you have already lost your property to a tax buyer, you can still get it back by either redeeming the home or getting a court to set the sale aside due to the overdue property taxes before the redemption period expires.
Facing Foreclosure? Seek the Help You Need
If you are facing foreclosure by the taxing authority due to property taxes, several options are available to help you keep your home.
You can contact Schmidt & Clark to have an experienced attorney review your case and provide the best advice possible.
Schmidt & Clark's knowledgeable attorneys understand the ins and outs of property taxes and can provide tailored advice to help you avoid foreclosure.