As a homeowner, you must pay annual property taxes to the county for your home and land. How counties spend the property taxes they collect varies, but these taxes generally fund county services such as fire departments, school districts and community projects. Falling behind on your property taxes carries serious consequences. If you leave your taxes unpaid for long enough, the county will seize your home via foreclosure.
Property Tax Foreclosure
Once the foreclosure process begins, a county official will appeal to the court for a judgment. Once it has a civil judgment against you, the county places a lien against your home for the unpaid tax debt. The lien gives the county a legal claim to your home. If you can afford to do so, you can pay the total cost of the lien and have it removed from your home. If you don't do so, the county reserves the right to call the lien due and seize your property in lieu of payment.
As a general rule, the county records liens against your home in the order they were filed. If a lien holder forecloses, it must then compensate any lien holders whose liens were filed previously and hold a senior position to the foreclosing creditor's lien. Property taxes are an exception to this rule. Your property tax lien takes priority over all other liens on your property – regardless of when the lien was filed. This gives the county the ability to seize and sell your home without first paying off any previously filed liens, such as your mortgage lien.
Your county government isn't likely to initiate foreclosure proceedings against you for a single late property tax payment. Counties in some states, such as Oregon and Washington, attempt to collect late property taxes for several years before foreclosing.
If the county has already attached a lien to your home for the debt, the county may not foreclose at all. Instead, the county has the right to sell the tax lien to a third-party investor. This investor then determines whether or not to foreclose and, if so, when to start the process.
The nightmare may not end just because you lost your home to foreclosure. Although the foreclosure itself eliminates any other liens that were attached to your property, it doesn't wipe away the debts behind those liens. If, for example, you owed $50,000 on your mortgage loan when the county foreclosed, your mortgage lender is still entitled to collect the full loan balance.
After foreclosing, the county will sell the home. Because the property taxes take priority over all other liens, this is the debt that gets paid first. If your home does not sell for enough money to pay off all of its outstanding liens in full, the creditors will demand payment from you after the foreclosure process is complete.
- Douglas County Clerk-Treasurer's Office: It Pays to Know – Where Do Your Property Taxes Go?
- Oregon.gov: Department of Revenue – Property Taxes
- Foreclosure University: How Does Lien Priority Affect Me?
- Clark County Washington: Property Tax Foreclosure Information
- CNN Money: The Other Foreclosure Crisis – Losing a Home Over $400 in Back Taxes
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