What Happens If I Don't Pay Property Taxes in Texas?

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 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 Texas, you might lose your home to tax foreclosure.

Fortunately, you'll find out about the tax foreclosure sale 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 sale, you'll get some time afterward to reclaim the property by "redeeming" it (see below).

How Tax Sales in Texas Work

In Texas, like other states, a delinquent tax amount, including interest and penalties, becomes a lien on the property. The lien attaches to the property on January 1 of the tax year (awaiting assessment and billing of taxes later in the calendar year). (Tex. Tax Code § 32.01).

At any time after the property tax becomes delinquent, the taxing authority may start a foreclosure in court. (Tex. Tax Code § 33.41). Generally, subject to a couple of exceptions, if the taxes aren't paid before February 1 of the year following the assessment and billing, the taxes are considered delinquent. (Tex. Tax Code § 31.02).

If you don't pay off the overdue amounts or have a valid defense against the foreclosure, the court will enter a judgment, and your property will be sold to a new owner at an auction. If the home doesn't sell at the tax sale, it will be "struck-off" to the county, which means the county gets the property. The county will then try to sell it at a later date.

Notice of the Tax Sale in Texas

Under Texas law, you must be given written notice of the sale before it takes place. Typically, you'll get the notice by personal delivery or in the mail. The notice will include the date, time, and location of the sale. (Tex. Tax Code § 34.01).

The notice is also published in a newspaper or, if there is no newspaper in your county, posted publicly. (Tex. Tax Code § 34.01).

How to Stop a Property Tax Sale in Texas

To stop the tax foreclosure, you can cure the delinquency by paying off the amount of the judgment at any time before the sale. Curing the delinquency will release the tax lien and stop the foreclosure process. (Tex. Tax Code § 33.53).

Property Tax Sale Procedures in Texas

If you don't cure the delinquency, your home will be sold at a public auction to the highest bidder. The minimum bid must be at least the lesser of:

• the aggregate amount of the judgments against the property, or
• the home's market value. (Tex. Tax Code § 33.50(b)).

If no bid is sufficient to pay the lesser of the judgment or the property's fair market value, then the taxing unit may terminate the sale or the property may be bid off to taxing unit for the lesser of such amounts unless otherwise agreed by other taxing units that are a party to the judgment.

The winning bidder (or the county), then gets a deed (title) to your home, subject to the right of redemption.

How to Redeem the Property After a Tax Sale

Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home, even after a tax sale happens. This process is called "redeeming" the property.

How the Right to Redeem Usually Works

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.

Right to Redeem the Property After a Tax Sale in Texas

In Texas, in most cases, you can redeem the home at any time up to two years after the date the deed is filed in the county records. (Tex. Tax Code § 34.21).

Does a Mortgage Survive a Tax Sale in Texas?

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.

Your Servicer Might Set Up an Escrow Account

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.

Getting Help

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 Texas and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.