If you are struggling with the delinquent property tax on your home, then you run the risk of losing the property to tax sale or foreclosure. But while the situation may seem dire, you might be able to reduce the amount of taxes you need to pay, or you can buy yourself the extra time to get caught up on what you owe.
Here we’ll go over what delinquent property tax means and what to do if you think your home is in jeopardy.
What Is Delinquent Property Tax?
A delinquent property tax is when a homeowner fails to pay property taxes on time (or at all) so frequently that it is forwarded to the county treasurer for collection. This normally happens on March 1 the year after it was billed. So, for instance, if you fail to pay property taxes in May of 2022, it will be sent to collections on March 1, 2023.
Why Do Property Taxes Matter?
Local governments impose property taxes on homeowners in order to finance municipal services. These taxes help pay for things such as public schools, police, fire-fighting, and utility facilities. Plus, the county or municipality governments have a significant stake in collecting property taxes so that they can meet their budgets. They usually don’t look kindly upon homeowners that don’t pay their taxes. They have a range of powerful collection methods to ensure that you will pay property taxes sooner or later, the worst of which may be the option to sell your home or have a tax lien against it.
What Is a Tax Lien?
A tax lien is one of the ways the government will try to collect unpaid property taxes. It serves as a guarantee that in the event of continued non-payment, the government will be able to seize the asset (in this case, the home) and sell it at auction in order to recoup the losses from delinquent property taxes.
What Happens When a Tax Lien Is On Your Home
A property tax lien generally has priority over all the other liens. The effect that this lien has is that your property cannot be sold until you pay the property tax bill. The lien acts as a cloud on your title. The buyers won’t be able to get the clear title to your home until you pay the bill and the lien is lifted. Therefore, you can forget about selling your property and walking away from unpaid property taxes.
Losing Your Home in a Tax Sale
If a person continues to be delinquent in property tax payments, then the taxing authority will schedule their home for a tax sale. Much like a foreclosure, it can play out in different ways. The taxing authority can simply sell a home at a tax sale and give the deed to the highest bidder at the sale.
Another potential action is the taxing authority selling the tax lien, instead of selling the home. In this scenario, which is arguably much better than the first, the person purchasing the lien will pay all the tax due, and the owner of the home will owe the lien-buyer, rather than the taxing authority. If a person continues not to pay, the purchaser can file a petition with the court to foreclose on the property and take ownership of it. Generally, there are several years before this last step occurs, but property taxes will continue to accrue during this time.
Generally, you will be able to buy back your property after a tax sale by paying buyers the amount that they paid for the home, or by paying the taxes owed. In most states, you can repurchase it one year after a tax sale, although different periods apply in different places.
Delinquent Property Taxes: Interest and Penalties
In case a person doesn’t pay their property taxes when they are due, then the local taxing authority will start charging interest on the tax account. Subsequently, the individual in question will incur substantial, unwanted monetary penalties. That means that the total balance that a person owes to the local government will steadily increase. At a certain point, the local government can even publish a notice of delinquent property tax in the local newspapers.
How Are Delinquent Property Tax Penalties Calculated?
Non-payment of property taxes are subject to two distinct late payment charges, as follows:
- Penalty – The day after an installment is due, a penalty of 1.25% will be added to the tax account.
- Interest – On any taxes that are not paid in a previous month, interest is charged at a rate of 1.25%. Interest is not calculated based on already accumulated interest, or on penalties that are already tacked on.
Late payment charges can’t be waived once charged, unless they were caused by an administrative error, or overcharge. In case a person subsequently remits payment for taxes, the payment will first be applied to any late payment charges. After that, it will be applied to the remaining taxes, which, unless paid in full, will leave a remaining balance for further payment.
Any balance due will continue to attract the late payment charges until it’s cleared by full payment.
What Options Do You Have With Delinquent Property Taxes?
Depending on where you live, you may have several options. If you fall behind on your property taxes so much that you receive notice of a tax sale, you need to contact your attorney as soon as possible.
1. Abatements
As an example, some of the taxing authorities allow requests for abatement of your taxes due to economic hardship. An abatement means that all parts of the property taxes will be forgiven, so you won’t be in danger of foreclosure or a tax sale. In this case, you’ll still need to prove to the taxing authority that you have enough income to meet basic living expenses.
2. Payment Plans
Another option is to fill out an application with the taxing authority to enter into a payment plan, allowing you to pay your dues in installments over time.
3. Social Programs
In some states and local governments, there are special programs to help financially struggling, or senior homeowners who are not able to pay their property taxes. These programs include low-interest loans, or grants. There are also property tax deferral programs in some states that require you to pay a specified percentage of the annual household income for your property taxes, and the state will pay the remainder.
SKYDAN Equity Partners’ Home Sale/Leaseback Program
SKYDAN Equity Partners is not a bank, not a mortgage company, and certainly not a lender. We partner with qualified homeowners to provide unique alternatives to home refinancing. Our home equity leaseback program allows you to sell your home and continue living in it for up to two years with no monthly payment. Once the term has expired, you can either buy your home back for the original purchase price plus the deferred rent or sell your property and gain any value over and above this amount.
Here’s how it works: