Real Estate

What Happens If You Don’t Pay Your Property Taxes?

Purple house

When the real estate tax bill arrives, it can be a financial blow for even those who have a bit of money tucked away. Falling behind on your tax bill can result in the loss of your home. However, there are resources available to minimize this risk.

Why May You Lose Your Home?

Tax law differs from one state to the next. However, most of the time, not paying your taxes may result in the loss of your property. For example, the taxing authority, usually a county-wide taxing authority, may force the home to be sold to repay the debt. In other cases, they may place a lien on the home, making it harder for anyone else to buy your home without the debt being paid.

Your first step is to find out what you owe. Then, learn more about your local tax laws. Here’s some support to help you through this situation.

Why Do You Pay Property Tax?

Many counties charge property tax as a way to help fund government activities. These funds may help pay for community schools, roadways, parks, and other services. The amount you pay depends specifically on the value of your home and the local tax rate. The more valuable the home is the higher your tax bill. Taxes are generally collected once or twice a year.

Many times, your mortgage lender will collect money with each payment to put towards an escrow account to pay your property taxes. Even if this does occur, you are responsible for ensuring your taxes are paid. If you fail to do so, the taxing authority is likely to send a delinquency notice to you. Then, one of several things can occur.

You’ll Pay Higher Fees

The longer your account is unpaid, the more costly it will be. Interest and penalties may apply, based on tax laws. This interest can grow monthly, making it more expensive with each passing month. That’s why it is so important to settle your tax debt in some way as soon as possible.

You’ll Face a Tax Lien

The taxing authority wants to make sure someone pays the debt. That’s why they may place a tax lien on your home. This is a legal action that stops the sale of the home. If anyone else tries to buy the home, this lien must be paid first before the title can be transferred. That may make selling your home on the open market much more difficult.

You Could Face a Forced Sale

Let’s say you continue to be unable to pay your tax bill. Eventually, most tax jurisdictions will force the sale of the property at auction. A tax sale like this is different from the foreclosure process. Several scenarios can occur.

  • The taxing authority can list your home for sale at a tax sale. The winning bidder has to pay the taxes owed and, when they do, they obtain the title of the home.
  • The taxing authority could sell just the tax lien to a third party. This means the property owner owes the investor the money. The investor can then force a foreclosure to occur and take ownership.
  • The mortgage lender may exercise its right to buy the tax lien. This would minimize the risk to the lender of a third party buying the tax lien. As a result, the lender may add the taxes to your mortgage and, if you fail to make payment, foreclose on the property.

This process can begin if you are late on your taxes by 30 days. State law determines the next steps, specifically how much time you are given to repay the debt. However, most often, you have 30 to 90 days, sometimes longer, to pay the debt.

What Can You Do?

If you simply cannot pay your debt, it may be possible to sell your home to an investor for what you owe on it. Some investors, such as, can offer a cash offer for your home. This helps you get rid of the debt and helps you to avoid foreclosure.

The key is to act to protect your right in the home. Foreclosure is a long, drawn-out process that limits your ability to buy a home for several years. Instead, work with an investor who can potentially help you get out of the loan and tax debt sooner.


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