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're a homeowner in Virginia and you're delinquent in paying your property taxes, you could potentially lose your home to a tax sale after a judicial process (basically, a tax foreclosure). Fortunately, a tax sale usually only happens if you don't respond to notice from the tax collector about getting caught up. But if you let the tax sale go through, you'll lose ownership of your property.
In most cases in Virginia, if your property taxes are delinquent on December 31 following the second anniversary of the due date, the locality can start a foreclosure on your home by filing a lawsuit in court seeking permission to sell the property. (Va. Code Ann. § 58.1-3965). (The foreclosure can start on the first anniversary of when the taxes became due for some properties, like condemned structures, derelict buildings, or properties that are declared blighted.)
If you don't take steps to stop the sale—either by providing a valid defense or by getting caught up on the delinquent amounts—the court will issue a judgment. Then, your home will be sold, typically at a public auction. (Va. Code Ann. § 58.1-3969). If no one bids on the property, the county, city, or town can purchase it at the sale. (Va. Code Ann. § 58.1-3970).
After the sale, the new owner will get a deed (title) to your home, and you'll lose ownership permanently. (Va. Code Ann. § 58.1-3965).
At least 30 days before starting the lawsuit, the tax collector must send you (the property owner) a notice. The notice must also be published in a newspaper at least 30 days before the foreclosure. (Va. Code Ann. § 58.1-3965).
Paying off the tax debt to prevent the sale is called "redeeming" the home. To redeem the property, you must pay all accumulated taxes, penalties, reasonable attorneys' fees, interest, and costs, typically by 5:00 on the day prior to the auction. (Va. Code Ann. § 58.1-3965). Check with the county treasurer to find out the exact deadline where you live.
Under Virginia law, if you can't afford to pay the entire overdue amount at once, you can enter into an agreement to pay in installments over an extended period, though no longer than 60 months. (Va. Code Ann. § 58.1-3965).
If you fall behind in your payments, the treasurer or other officer responsible for collecting the taxes can void the agreement upon 15 days written notice. Then, the foreclosure will proceed. (Va. Code Ann. § 58.1-3965).
Also, you won't be eligible to enter into another installment agreement for that property within three years of the default. (Va. Code Ann. § 58.1-3965).
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 also 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, like Virginia, the redemption period happens before the sale.
In Virginia, you can't redeem your home after a tax sale.
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 sale in Virginia and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.