People who own real property have to 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 your behalf through an escrow account. But if the taxes aren't collected and paid through this kind of account, you must pay them directly to the taxing authority.
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 don't pay the real property taxes on your South Carolina home, the tax collector can then sell your home in a tax sale to satisfy the lien.
But the winning bidder from the sale can't get ownership of your home right away; you'll get some time to get caught up on the overdue amounts before this happens. You'll most likely eventually lose the property permanently, though, if you don't pay off the tax debt during what's called a "redemption period" after the sale.
In a tax lien certificate sale, the taxing authority sells the tax lien, and the purchaser gets the right to collect the debt along with penalties and interest. If the delinquent amounts aren't paid, the purchaser can typically foreclose or follow other procedures to convert the certificate to a deed.
In some jurisdictions, though, 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 or the tax collector sells the property itself.
If you don't get current on the tax debt, the person officially in charge of collecting delinquent taxes, most likely the tax collector or county treasurer, can sell your home at a public auction. At the auction, the winning buyer will be the person or entity that offers the highest bid above the amount sufficient to pay all delinquent taxes, assessments, penalties, and costs. (S.C. Code Ann. § 12-51-50). But the buyer doesn't get ownership of the home right away. Instead, the purchaser receives a receipt following the sale, subject to the right of redemption (see below). (S.C. Code Ann. § 12-51-60).
If no one else makes a bid on the property at the sale, the Forfeited Land Commission will be the winning bidder unless the property is contaminated and the Commission opts not to make a bid. (S.C. Code Ann. § 12-51-55).
South Carolina law requires notice of the sale to be published in a local newspaper once a week for three consecutive weeks. But you won't receive a notice about the sale through the mail. The tax collector will, however, send notice in the mail about the delinquency before the publication of the sale happens. (S.C. Code Ann. § 12-51-40).
Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home. 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 the sale.
Following a tax sale in South Carolina, you get twelve months to redeem the property by paying off the delinquent amounts. Redeeming the home will prevent the purchaser from taking title to your property. (S.C. Code Ann. § 12-51-90).
If you don't redeem the home, then the purchaser eventually gets a tax deed to the property and becomes the new owner of the home. (S.C. Code Ann. § 12-51-90, § 12-51-130).
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 you lose your home through a tax sale process, mortgages get wiped out. 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 that 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 sale in South Carolina and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.