If you fall behind in the property tax payments on your home, certain things could happen that will lead to you losing the home. For example:
In other cases, your mortgage lender may decide to advance funds to pay the delinquent taxes and then bill you for them. If you don’t reimburse the lender, it may foreclose your home.
Owners of real property have to pay property taxes. These taxes fund various services that the government provides, such as schools, libraries, roads, and parks. The amount of tax due is usually based on the home’s assessed value.
In many cases, a mortgage lender will collect property taxes as part of the monthly mortgage payment and pay the taxes on the homeowner's behalf through an escrow account. However, if the taxes are not collected and paid through escrow, the homeowner must pay them on his or her own.
When the homeowner doesn’t pay the property taxes, the delinquent amount becomes a lien on the home. (Learn more about different types of liens and when a lien can attach to your home in Nolo’s article Types of Property Liens.)
Once there is a property tax lien on the home, the taxing authority may eventually hold a tax sale, which is like a foreclosure sale. Generally, there are two basic types of tax sales: tax deed sales and tax lien certificate sales.
Tax deed sales. In a tax deed sale, the taxing authority sells the home outright and the purchaser gets a deed to the property.
Tax lien certificate sales. 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 are not paid, the purchaser can foreclose or follow certain procedures to convert the certificate to a deed.
(In certain jurisdictions, there is no actual sale. The taxing authority simply executes its lien by taking title to the home. State law then generally provides a procedure for the taxing authority to dispose of the home, usually by selling it.)
In most states, you can redeem (buy back) your home after a tax sale by paying the buyer the amount he or she paid (or by paying the taxes owed), plus interest, within a certain time period. Exactly how long you’ll get to redeem varies from state to state, but usually you’ll get at least a year from the sale. (In other states, you can redeem the home before the sale.)
To find out if you get the right to redeem your home after a tax sale in your state, talk to an attorney.
Property tax liens almost always have priority over other liens, including mortgages. This means that if your home is sold through a tax sale, the sale wipes out any mortgages. (Learn more about lien priority.)
Since a tax lien has priority over even a first mortgage lender, the lender will usually advance money to pay delinquent property taxes in order to prevent a tax sale. The lender will then demand reimbursement from you (the borrower). (The terms of the mortgage contract will require the borrower to stay current on the property taxes.)
If you don’t pay up, this constitutes a default under the terms of the mortgage and the lender can foreclose on the home in the same manner as if you had fallen behind in mortgage payments. (To learn the ins and outs of the foreclosure process, and foreclosure procedures in your state, visit our Foreclosure Center.)
If you are having trouble paying your taxes, there are a few strategies you can employ to reduce your tax bill or get extra time to pay. To learn about them, see Options If You Can't Pay the Property Tax on Your Home.