Foreclosure Due to Delinquent Property Taxes

by Ciele Edwards
The proceeds from the foreclosure sale go toward your property tax debt.

The proceeds from the foreclosure sale go toward your property tax debt.

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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.

Lien Priority

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.

Time Frame

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.

Effects

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.

About the Author

Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.

Photo Credits

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