If you fail to pay your property taxes or other municipal charges, like a sewer or water bill, the past-due amount becomes a lien on the home. This type of lien almost always has priority over other liens, including mortgages. If the taxes remain unpaid, in most cases, the taxing authority will eventually:
In some places, however, a sale isn't held. Instead, the taxing authority executes its lien by taking title to the home. State law then generally provides a procedure for the taxing authority to dispose of the property, usually by selling it. In other jurisdictions, the taxing authority uses a foreclosure process before holding a sale.
In many states, the home can be sold for the amount of the past-due taxes. So, a $300,000 home could be sold for $1,500 of unpaid taxes. This situation is very different from a home mortgage foreclosure where the purchaser at the sale usually pays an amount close to the property's fair market value. Ultimately, in a tax sale, the purchaser can potentially obtain title to the home for a fraction of its actual value.
Generally, people who lose their home to a tax sale have two options to get the property back: redeeming it or setting aside (overturning) the sale.
In most states, delinquent taxpayers get some time during which they can repurchase ("redeem") the home after a tax sale by paying the buyer the amount paid at the sale or paying the taxes owed, plus interest, penalties, and costs. In some states, the redemption period occurs before the sale. But if you don’t redeem, the purchaser can get title to the home free and clear of any liens that existed before the sale.
Usually, the homeowner gets the right to live in the home during the redemption period. Exactly how long the redemption period lasts varies from state to state; one year to three years is typical. In some states, though, the redemption period is much shorter. Check your state laws or consult with an attorney to find out the tax sale redemption period where you live.
If you can, you should redeem as soon as possible to prevent additional interest and penalties from accruing.
Sometimes, homeowners aren't aware that a tax sale has been scheduled until after it's already happened. Below are some situations where you might be able to invalidate a completed tax sale.
Defects in the tax lien, such as omitting one of the property owners' names, or defects in the tax sale process, like failing to give proper notice, might provide grounds to set aside a tax sale. Minor mistakes probably aren't enough to invalidate a sale, but a defect that prejudices the homeowner's rights probably will.
For example, let's say a property owner provides the county (the taxing authority) with a new address for mailings. But the county doesn't send any notices about the delinquent taxes to the property owner at the new address. So, the property owner doesn't receive notice of a tax sale. In this situation, the sale could probably be set aside for lack of proper notice.
Whether a particular defect is significant enough to invalidate the sale depends on a state's statutes and case law.
If the homeowner already paid the taxes, the sale is invalid and could be set aside. Likewise, if the property is exempt from taxation, a tax sale would be void.
A legitimate excuse for failing to respond to, say, a tax sale foreclosure action might justify setting aside the sale. For example, if a 74-year-old widow with a psychiatric disorder fails to do anything about the delinquent taxes until eviction proceedings start, a court would likely set aside the sale and let her keep the home if she pays the full amount of the taxes due.
The reasons that justify, as well as the procedures for, invalidating a tax sale are complicated. This article covers just a few of the situations that might provide grounds to set aside a tax sale. If you’ve lost your home to a tax sale and want to learn more about setting the sale aside or redeeming the property, you should speak with a qualified real estate attorney, tax lawyer, or foreclosure lawyer as soon as possible.