People who own real property must pay property taxes. The government uses the money these taxes generate to pay for schools, public services, libraries, roads, parks, and the like. Typically, the tax amount is based on a property's assessed value.
When homeowners don't pay their property taxes, the overdue amount becomes a lien on the property. A lien effectively makes the property act as collateral for the debt. All states have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes.
So, if you don't pay your real property taxes in Nebraska, you might eventually lose your home, or some portion of it, to a new owner at a tax sale. You will, however, get at least three years after the sale to make things right by getting caught up on the delinquent amounts.
If the taxes haven't been paid in full on or before the first Monday of March after they become delinquent, the property is subject to sale on or after that date. (Neb. Rev. Stat. § 77-1801.)
The property is sold at auction to the person who offers to pay delinquent taxes and costs for the smallest portion of the property. In some cases, though, a land bank provides an automatically accepted bid, becomes the purchaser, and no auction is held. (Neb. Rev. Stat. § 77-1807.)
Property remaining unsold after public auction is sold at private sale. (Neb. Rev. Stat. § 77-1814.)
After the sale, the purchaser who buys the property gets a "certificate of purchase" (a tax lien certificate.) (Neb. Rev. Stat. § 77-1818.) But, the purchaser can't get title to your home yet, because Nebraska law institutes a waiting period, called a "redemption" period (see below). (Neb. Rev. Stat. § 77-1819.)
During this time, you're legally able to pay off the debt and reclaim your property. The certificate of purchase acts as evidence of the purchaser's interest in the property during the redemption period. If you don't pay off the tax debt during the redemption period, the purchaser can get title to your home.
Prior to the tax sale, the county treasurer must publish and post notice of the sale.
The county treasurer must publish a list of the property to be sold in a newspaper, once a week for three weeks, beginning the first week in February. The list will also be published online. (Neb. Rev. Stat. § 77-1804.)
The treasurer must also post a copy of the notice in a conspicuous place in their office. And a list of properties that will be sold is published on the Department of Revenue website. (Neb. Rev. Stat. § 77-1804.)
In Nebraska, you get at least three years after a tax sale, called a "redemption period," to pay off the tax debt and keep your property. (Neb. Rev. Stat. §§ 77-1837, 77-1902.) The purchaser must wait until the three-year redemption period expires before taking the necessary steps to get ownership of your home.
To reclaim your property, you must pay the overdue amount plus interest and various other amounts. (Neb. Rev. Stat. §§ 77-1824, 77-1917.)
After the redemption period sale expires, the purchaser must either apply for a tax deed or foreclose to get title to the property.
You can redeem the property up until the date of a tax deed application. You have up until the close of business on the day the county treasurer receives the tax deed application. (Neb. Rev. Stat. § 77-1824.)
In a foreclosure, you can redeem the property up until final confirmation of the sale. (Neb. Rev. Stat. § 77-1917.)
If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly payment to pay the property taxes. The servicer then pays the taxes on your behalf through an escrow account.
But if the property taxes aren't collected and paid through this kind of account, you must pay them directly.
If your loan isn't escrowed and you don't pay the property taxes, the loan servicer might pay any delinquent taxes and then bill you for them. Here's why: Property tax liens almost always have priority over other liens, including mortgage liens and deed of trust liens. (For purposes of this discussion, the terms "mortgage" and "deed of trust" are used interchangeably.)
Because a property tax lien has priority, a completed tax sale and foreclosure process wipes out any mortgages. So, the loan servicer will usually advance money to pay delinquent property taxes to prevent this sale from happening. The servicer will then demand reimbursement from you, the borrower.
The terms of most mortgage contracts require the borrower to stay current on the property taxes. If you don't reimburse the servicer for the tax amount that it paid, you'll be in default under the mortgage's terms.
The servicer can then foreclose on the home in the same manner as if you had fallen behind in monthly payments.
After demanding repayment of the amount it paid for the taxes, penalties, and interest (assuming you repay this debt), your servicer will probably set up an escrow account for the loan.
Each month, you'll have to pay approximately one-twelfth of the estimated annual cost of property taxes—and perhaps other expenses, like insurance—along with your regular monthly payment of principal and interest. This money goes into the escrow account.
The loan servicer then pays the cost of the taxes and other escrow items on your behalf through the escrow account.
Many mortgages have a clause allowing the lender to establish an escrow account basically at any time. The servicer establishes and manages the account on the lender's behalf.
To find out if and when the lender can set up an escrow account for your loan, read your mortgage contract and any other relevant documentation you've signed, like an escrow waiver.
The downside to having an escrow account is that you'll have to make a bigger monthly payment to the servicer. On the positive side, having an escrow account saves you from having to come up with a large amount of money when tax bills, and possibly other bills, are due.
If you're having trouble paying your property taxes, you might be able to reduce your tax bill or get extra time to pay.
Talk to a foreclosure lawyer, tax lawyer, or real estate lawyer if you're facing a tax sale in Nebraska and have questions about the process or need help redeeming your property,
To learn more about property taxes and other aspects of homeownership in general, get Nolo's Essential Guide to Buying Your First Home by Ilona Bray, J.D., Attorney Ann O'Connell, and Marcia Stewart.