Each state has laws that allow the local government to foreclose on your home—or otherwise take the property—if you don’t pay your property taxes. When you lose your home to a tax sale, you generally have two options to get the home back: redeeming the home or setting aside (overturning) the sale.
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. (To learn about different types of liens, see Types of Property Liens.)
If the taxes remain unpaid, in most cases, the taxing authority will eventually:
In many states, the home can be sold for the amount of the past-due taxes, which means that a $300,000 home could be sold for $1,500, for example. This is very different from a home mortgage foreclosure where the purchaser at the sale usually pays an amount close to the fair market value of the property. Ultimately, in a tax sale, the purchaser can potentially obtain title to the home for a fraction of its actual value. (If you're struggling to pay property taxes, see Options if You Can't Pay Property Taxes on Your Home, for tips on what to do.)
In general, there are two ways to get your home back after your home is sold a tax sale: redeeming the home or setting aside the sale. (If only the lien was sold, you can usually pay off the debt before the lienholder forecloses, or takes other required steps to obtain title to the property, and keep the home.)
In most states, you get a period of time during which you can repurchase ("redeem") your home after a tax sale by paying the buyer the amount he or she paid—or by paying the taxes owed—plus interest, penalties, and costs. (In some states, the redemption period occurs before the sale.) If you don’t redeem, the purchaser gets title to the home free and clear of any liens that existed before the sale.
Typically, you can live in the home during the redemption period. Exactly how long you’ll get to redeem varies from state to state, but generally you’ll get between one year and three years. In certain 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 are not aware that a tax sale has been scheduled until after it has already been completed. Below are some situations where you may be able to invalidate a tax sale after it has occurred.
Defects in the tax lien or tax sale process. Defects in the tax lien (such as omitting the name of one of the property owners) or defects in the tax sale process (like failing to give proper notice) might provide grounds to set aside the sale. Minor mistakes are probably not enough to invalidate a sale, but a defect that prejudices the rights of the homeowner 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 does not send any notices to the property owner at his new address. As a result, 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.
The taxes were paid or are not owed. 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.
Excusable neglect. If you have a legitimate excuse for failing to respond to a tax sale foreclosure action, this might justify setting aside the sale. For example, say a 74-year-old widow with a psychiatric disorder fails to do anything about the delinquent taxes until eviction proceedings start. In this situation, 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. There are, of course, others. If you’ve lost your home to a tax sale and want to learn more about setting the sale aside or redeeming the home, you should speak with a qualified attorney as soon as possible.