If you don't pay your real property taxes in Oregon, you might lose your home to tax foreclosure. Fortunately, you'll find out about the tax foreclosure before it happens, and you'll have the chance to get current on the delinquent amounts, plus interest and costs, to prevent the loss of your home.
And even if you let the foreclosure go through to a judgment, you'll get some time afterward to reclaim the property by "redeeming" it (see below).
People who own real property must pay property taxes. The government uses the money that 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.
If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly mortgage payment to later pay the property taxes. The servicer pays the taxes on the homeowner's behalf through an escrow account. But if the taxes aren't collected and paid through this kind of account, the homeowner must pay them directly.
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.
Accordingly, if you get behind in paying your real property taxes in Oregon, you might lose your home to tax foreclosure.
In Oregon, property taxes that aren't paid on or before May 15 of the tax year in which they're billed are delinquent. The property is subject to a tax foreclosure three years after the first date of delinquency. (Or. Rev. Stat. § 312.010, § 312.050.)
The county prepares a list called a "foreclosure list" of all properties subject to foreclosure. It then applies for a judgment with the court and publishes the foreclosure list in a newspaper. (Or. Rev. Stat. § 312.030.)
Once the court issues a judgment of foreclosure, the redemption period (see below) begins. If you don't pay off the taxes, interest, fees, and penalties during the redemption period, the tax collector will deed your home to the county. (Or. Rev. Stat. § 312.200.) At this point, you lose all rights to the property, and the county may choose to sell it to a new owner.
Before the tax foreclosure, the county in which your property is located must either send you notice by both regular and certified mail or personally serve you notice. (Or. Rev. Stat. § 312.040.)
Also, if notice is sent by mail, the foreclosure will be published in a newspaper of general circulation in the county. (Or. Rev. Stat. § 312.040.) But it will probably be buried in the fine print—you're not likely to run across it.
You can file an answer to the foreclosure with any defenses you want to bring up, like you actually paid the taxes. You must file your response within 30 days after the foreclosure list is first published, excluding the first day of publication. (Or. Rev. Stat. § 312.070.)
If you don't have a valid defense, you'll have to get caught up on what you owe before the judgment to stop the foreclosure. Before the foreclosure list is published, you can get your home out of foreclosure by paying the delinquent taxes and interest or penalty accrued. After the list is published, you can stop the foreclosure proceeding at any time before the court issues a judgment by paying the delinquent taxes, plus interest and a penalty of 5% of the total amount of taxes and interest charged against the property. (Or. Rev. Stat. § 312.110.)
Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home, even after a tax sale or tax foreclosure happens. This process is called "redeeming" the property.
In many states, the homeowner can redeem the home after a tax sale by paying the buyer from the tax sale the amount paid (or by paying the taxes owed), plus interest, within a limited amount of time. Exactly how long the redemption period lasts varies from state to state, but usually, the homeowner gets at least a year from the sale to redeem the property.
In other states, though, the redemption period happens before a tax sale.
In Oregon, you get two years, called a "redemption period," after the foreclosure judgment to pay off the delinquent taxes, plus interest, penalty, and fees, to prevent the county from getting your home. (Or. Rev. Stat. § 312.120, § 312.200.) In some circumstances, though, like if you commit waste or move out of the home and certain criteria are met, you'll lose part of your redemption period. (Or. Rev. Stat. § 312.122.)
But if you don't redeem, the county will get a deed (title) to your home. (The Oregon tax foreclosure procedure doesn't involve a tax sale or auction.) Your right to redeem the property expires on the execution of the deed to the county. (Or. Rev. Stat. § 312.200.)
Once the property is deeded to the county, your ownership rights are terminated. After the county gets title to your home, it will probably sell the property to a new owner. (Or. Rev. Stat. § 312.270.)
If you want to get the home back, you might be able to repurchase the property, but it's up to the county. (Or. Rev. Stat. § 275.180.)
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, if your home is sold through a tax foreclosure, the sale wipes out any mortgages. So, the loan servicer will usually advance money to pay delinquent property taxes to prevent this 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 it paid, you'll be in default under the terms of the mortgage, and the servicer can 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, plus interest (and assuming you repay this tax 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 usual 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.
The downside to having an escrow account is that you'll have to make a bigger payment to the servicer each month. 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 perhaps 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. If you're already facing a property tax foreclosure in Oregon and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.