If you fall behind in making the property tax payments for your home, you might end up losing the property. For example:
The taxing authority could sell your home to satisfy the debt. (It might do this through a foreclosure process.)The taxing authority might sell the tax lien that it holds, and the purchaser might be able to foreclose.
In other cases, your loan servicer might advance funds to pay the delinquent taxes and then bill you for them. If you don’t reimburse the servicer, it could foreclose your home.
Understanding Property Taxes and Tax Liens
Owners of real property have to pay property taxes. These taxes fund various services that the government provides, such as schools, libraries, roads, and parks. The amount of tax due is usually based on the home’s assessed value.
In many cases, a loan servicer (on behalf of the lender) will collect property taxes as part of the monthly mortgage payment and pay the taxes on the homeowner's behalf through an escrow account. But if the taxes are not collected and paid through escrow, the homeowner must pay them on his or her own. (Read about whether you can get rid of an escrow account and pay property taxes on your own, if you have one.)
When the homeowner doesn’t pay the property taxes, the delinquent amount becomes a lien on the home.
The Taxing Authority May Foreclose
Once there's a property tax lien on the home, the taxing authority may eventually hold a tax sale, which is like a foreclosure sale. Generally, there are two basic types of tax sales: tax deed sales and tax lien certificate sales.
Tax deed sales. In a tax deed sale, the taxing authority sells the home outright and the purchaser gets a deed to the property.
Tax lien certificate sales. In a tax lien certificate sale, the taxing authority sells the tax lien and the purchaser gets the right to collect the debt along with penalties and interest. If the delinquent amounts are not paid, the purchaser can foreclose or follow certain procedures to convert the certificate to a deed.
(In certain jurisdictions, there is no actual sale. The taxing authority simply executes its lien by taking title to the home. State law then generally provides a procedure for the taxing authority to dispose of the home, usually by selling it.)
Your Right to Redeem the Home Before or After a Tax Sale
In most states, you can redeem (buy back) your home after a tax sale by paying the buyer the amount he or she paid (or by paying the taxes owed), plus interest, within a certain time period. Exactly how long you’ll get to redeem varies from state to state, but usually you’ll get at least a year from the sale.
In other states, you can redeem the home before the sale.
Getting Help
If you're having trouble paying your property taxes, there are a few strategies you can employ to reduce your tax bill or get extra time to pay. To learn about them, see help me pay my taxes current and stop foreclosure today.