Three Ways to Stop A Property Tax Foreclosure

​

We all fall on bad times, so I know that anyone can find themselves in a situation where they’re not sure what to do. While there aren’t many options when it comes to getting around your tax obligation, there are a few ways you can stop the foreclosure from happening.

​

1. Pay the taxes off – I know this is sometimes easier said than done, but it’s important to face your obligations head-on as a homeowner or property investor. Don’t run from having a hard conversation with your local tax clerk.  They’re going to want their money, but they also have a vested interest in making sure their neighborhoods aren’t full of abandoned homes. Talk with them to see what options are available to get you back into good standing.
   
    

2. Sell the property – If you can sell it off before the foreclosure, there’s a chance that you’ll be able to see some money back. Again, your tax obligation will get paid off first, then any other positions on the title, and anything that’s left goes to you. While that might equate to way less than what you expected when you first thought about selling your home one day, it’s better than having a foreclosure on your credit report.
    

3. File for Bankruptcy – This is only a temporary solution, like a stay of execution. You’ll still owe your taxes but won't work for any property with too much equity.  You might find yourself worse off than before due to lawyer fees and other bankruptcy costs even if the courts allowed it.  Just to delay the auction date by a couple of months in the end really just isn't worth it, because 2 months down the road you still have to pay all the back taxes, penalties and/or mortgages payments anyway, on top of the expensive Attorney Fees and Bankruptcy Costs.

​

What Happens If My Home Goes to a Tax Sale?

​

If you fail to keep current on your property taxes or municipal charges, like a sewer or water bill, the past-due amount becomes a lien on your home. All states have laws allowing the local government to then sell your home through a tax lien process to collect the delinquent taxes.

​

In this article, you'll learn about how property tax sales work and how you might be able to save your home even after a tax sale happens.

Facing Foreclosure?
 

​

How Property Tax Sales Work

​

Each state has different laws for tax sales. Generally, the taxing authority, usually the county, doesn't have to go to court before holding a tax sale.
 

Notice About Delinquent Property Taxes

​

Instead, the process often starts when the taxing authority files a list of delinquent taxes, which includes information about the taxpayer, the property, and the amount due, with the recorder's office and publishes a copy in the newspaper. Also, the homeowner is typically entitled to some form of notice of the pending tax sale.

​

How Property Tax Sales Work
 

Then, in some places, the county holds a public auction. Commonly, bidding begins at the amount that covers the delinquent taxes, interest, and related penalties owed to the taxing authority. The winning bidder at the sale normally receives either a:

• tax deed, or

• tax lien certificate (see below).
   

Tax Foreclosures and Other Procedures
 

In some jurisdictions, though, a sale isn't held. The taxing authority simply executes its lien by taking title to the home. In other places, the taxing authority must foreclose the property, usually by filing a lawsuit in court, before holding a tax sale.
 

Tax Deed Sales
 

In tax deed sales, the taxing authority sells the title to the home.

​

Tax Lien Certificate Sales
 

On the other hand, a tax lien certificate sale doesn't convey ownership of the property. Instead, the taxing authority sells its lien, and the purchaser usually receives a tax lien certificate.
 

This certificate entitles the purchaser to take over the taxing authority's position and collect full payment of the past-due taxes, plus interest, from the delinquent taxpayer. If the delinquent taxes aren't paid by a certain date, the purchaser of the lien generally has a right to foreclose the lien or take specific steps to convert the certificate to a deed and get title to the home.
 

State and Local Governments Can't Keep the Profits After Tax Sales
 

On May 25, 2023, a unanimous U.S. Supreme Court ruled in the case of Tyler v. Hennepin County that it's unconstitutional for the state or local government to take your home to cover your property tax bill and then keep the profits.
 

How to Save Your Home After a Property Tax Sale
 

Even after your property goes to a tax sale, you might have options to save the home.
 

Saving Your Home After a Tax Deed Sale
 

You might be able to reclaim your home after a tax deed sale by redeeming it or setting aside the sale.
 

Redeeming the property. Many jurisdictions that sell tax deeds offer a right of redemption after the sale, which allows you to get your home back. To redeem, you must reimburse the purchaser the amount paid at the sale or pay the taxes owed, plus interest and costs, within a specific time frame called a "redemption period," which is generally between one to three years after the sale.

 

But sometimes, the redemption period takes place before the sale. If you pay the delinquent taxes before the sale, the sale won't happen.

 

Setting aside a sale. If you can't redeem the home, you might be able to set aside (invalidate) the tax sale after it has occurred by showing, for example:
 

• defects in the tax lien or tax sale process

• the taxes were paid or not owed, or

• a good reason why you neglected to pay the past-due amounts.
   

Saving Your Home After a Tax Lien Sale
 

After a tax lien sale, you still own the home because the purchaser only buys a lien against your property. If you pay off the amount of the lien or the purchase price (depending on the situation), plus allowed costs, like interest, within a specified time, you get to keep the home. This process, too, is referred to as "redeeming" the home.