Visit www.txpropertytaxsolution.com for information on obtaining tax assistance and see if you qualify.
Owners of real property have to pay property taxes. These taxes fund various services that the government provides, like schools, libraries, roads, parks, and the like. The amount of tax due is usually based on a home’s assessed value. In many cases, a loan servicer (on behalf of the 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. But if the taxes aren’t collected and paid through escrow, the homeowner must pay them. When a homeowner doesn’t pay the property taxes, the delinquent amount becomes a lien on the home.
If you fall behind in making the property tax payments for your real estate, you might end up losing your home. The taxing authority could sell your home, perhaps through a foreclosure process, to satisfy the debt. Or the taxing authority might sell the tax lien that it holds, and the purchaser might be able to foreclose.
The Taxing Authority Might Hold a Tax Sale
Once a property tax lien is on the home, the taxing authority might eventually hold a tax sale, which is similar to a foreclosure sale. Generally, the two basic types of tax sales are “tax deed sales” and “tax lien certificate sales.”
What Is a Tax Deed Sale?
In a tax deed sale, the taxing authority sells the home outright, and the purchaser gets a deed to the property.
What Is a Tax Lien Certificate 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 (meaning, the person or entity that bought the tax lien can get ownership of the property).
In some jurisdictions, though, a sale isn’t held. Instead, 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 property, usually by selling it. In other jurisdictions, the taxing authority uses a foreclosure process before holding a sale.
When Your Loan Servicer Might Foreclose
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 sale, the sale wipes out any mortgages. So, the servicer will usually advance money to pay delinquent property taxes to prevent a tax sale. The servicer will then demand reimbursement from you (the borrower).
The terms of the loan contract usually require the borrower to stay current on the property taxes. If you don’t pay up, 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.
nolo.com article, “What Happens If You Don’t Pay Property Taxes on Your Home?“