Taxpayers are at risk of losing their homes if they don’t pay their property taxes, so before you allow your tax bill to go unpaid, it is beneficial to learn about your taxpayer’s responsibility as a homeowner.
TABLE OF CONTENTS
- When people don’t pay property taxes, they are at risk of having their tax deed sold in a tax sale, a tax lien being sold, their home being levied, or potentially a tax foreclosure.
- A tax deed sale involves a taxing authority selling the title of a home to the highest bidder, during which the purchaser will gain the deed to the property after the redemption period is expired.
- A tax lien certificate sale is when the tax authority sells the tax lien to a purchaser who earns the right to collect the interest, penalties, and debt on the property.
- Before tax sales are finalized, the property owner has a set redemption period during which they have the opportunity to pay the taxes owed, plus interest and costs, in hopes of reclaiming the property.
What Happens If You Don't Pay Property Taxes?
All homeowners owe a certain annual amount for their property tax bill as the funds are used by the government to pay for costs in the community, and in the case that the taxpayer fails to submit their required payment, there can be serious consequences in relation to the IRS and other government agencies.
There are several possible outcomes when people don’t pay property taxes, such as:
- A tax deed sale is held to compensate for the lost tax income
- A tax lien sale is held, allowing the purchaser to foreclose
- The home is levied by the taxing authority
- A mortgage lender pays the delinquent fees and bills the debtor for the expense
Neglecting Property Tax Payments May Lead To A Tax Sale
While the IRS will send the taxpayer at least one tax notice informing them of their delinquency when real estate taxes are well overdue, if they still fail to comply with tax law, the IRS and local government agencies will pursue more serious tax collection efforts to secure payment for the taxes owed.
Tax Deed Sale
A tax deed sale is a situation in which the taxing authority sells the home to the highest bidder and the buyer receives the title or deed to the property. The sale price for a tax deed sale is often the amount of unpaid taxes, and in some cases, a foreclosure process is initiated.
Before a tax sale is initiated, the taxing authority will usually record a list in the land records describing who the delinquent taxpayer is, the details of the property, and how much tax is due, often publishing the information in a local newspaper.
While the tax deed is technically for sale in this situation, it is beneficial to note that the person purchasing the tax deed may not receive the title until after the redemption period expires.
Tax Lien Certificate Sale
A tax lien certificate sale is a situation in which the taxing authority sells the tax lien for a property. Following this transaction, the purchaser can collect the debt, interest, and penalties.
Additionally, if the original homeowner is noncompliant and fails to meet the deadline of paying the delinquent amounts, the person who bought the tax lien certificate can often foreclose the property or take action to convert the certificate into an official deed for the house and gain ownership.
No Tax Sale
While a tax sale is possible when a taxpayer is delinquent in paying their property taxes, there are some situations where the taxing authority will not hold a tax sale and instead will execute the tax lien and take the title of the home.
Depending on the situation, the state law will often provide a procedure allowing the taxing authority to sell the house to a new owner.
When Are Property Owners At Risk Of Foreclosure?
Most of the time, property tax liens that secure payment for unpaid debts are at a higher priority over other types of tax liens. For this reason, people often take advantage of the opportunity to advance the money to bring delinquent property taxes current so that they can bill the homeowner for the tax amounts.
In this situation, the lender has the opportunity to foreclose the home if the borrower is unable to make payments to the lender for the money they technically fronted for the unpaid property taxes.
Are All Tax Sales Final?
While the prospect of losing their claim as a property owner due to unpaid property taxes is stressful, homeowners in this situation still have a chance to rectify the situation before the tax sale is final.
Many states offer redemption periods of varying lengths that allow the homeowner a chance to redeem their property in the case that their asset is taken to a tax sale. During this period, which usually lasts for about a year, the homeowner has the opportunity to reclaim the property by reimbursing the buyer for how much they purchased the deed or lien for, the costs, and the interest.
Aside from redeeming their property, taxpayers have another option to request that a court invalidate the tax sale. If approved for this type of exemption, the taxpayer will be able to regain ownership of their property before it is sold to another buyer.
If you are behind on paying your real estate taxes or are already experiencing the struggle of property tax liens, onboarding an experienced tax attorney to guide you through the process can help you protect your rights and potentially save you from losing your property. If you are determined to maintain your residence and avoid tax foreclosure, schedule a free consultation with the tax professionals at Ideal Tax to get advice about how you can save money on taxes and protect your assets.