What Happens If You Don't Pay Your Property Taxes?
Reviewed by Carina Jenkins, J.D.
Homeowners facing delinquent property taxes could find themselves in precarious waters if they’re unable to catch up on their tax bills. Local governments depend on property taxes to provide essential services such as education, emergency response services and park administration costs.
It’s important to stay current on your property tax bill. Here’s what happens if you fall behind.
Laws vary greatly by state, so if you’ve fallen behind on your taxes, you should speak with a legal professional who understands local laws and how they apply to your situation. There are a few actions the government may take if you have an unpaid tax bill.
The first step that most county or state governments take is placing a lien on your home called a tax lien. This indicates that you owe a debt for the amount of overdue taxes on your home, and other actions may follow if you don’t arrange to pay the debt. Your local government has the choice to use tax liens to foreclose on your home or to transfer the lien to a third party.
The second step governments might take is to sell the lien they have against your home. This is called a tax sale, and it gives the party that buys the lien the legal right to foreclose on your house if you don’t meet their terms. If you’ve reached this point, you may need to pay additional interest and penalties on your tax debt before the lien can be removed.
The lender that owns your mortgage might step in to protect their investment in your property because property tax liens usually take precedence over private liens.
If your mortgage doesn't include escrow to pay property taxes and you don't pay them yourself, the lender might cover the bill to protect its interests. However, it will expect you to pay the money back. Lenders generally have the right to foreclose on your home if you don’t pay them back for the tax bill. Instead of a tax sale, you would go through an ordinary foreclosure instead.
If you haven’t paid your taxes on time, you should receive a notice regarding your past-due tax liability. In most cases, you’re required to pay penalties and interest on what you owe. Those fees accumulate each month until you make arrangements to pay. In many cases, it’s possible to contact the tax authority for your county and arrange payment plans.
The biggest mistake you can make is to ignore the notices you receive about your tax bill. Opening a dialogue with your county about your taxes may allow you to save your house because local governments primarily want to collect the owed taxes. However, if you don’t respond to notices in 60 days, the government will begin to take the measures indicated above.
How things might play out depends on your state laws, but you could ultimately lose your home if you don’t make an effort to pay your tax bill. If your house had a tax lien placed on it that was sold to a third party, you’re probably entitled to a redemption period. The way redemption works is you’d pay the party that purchased your lien within a set amount of time to have the lien removed.
If your bank paid the taxes on your behalf, you need to work with them to avoid foreclosure on your property.
When you’re applying for a mortgage, you may be offered the option of having your property taxes placed into an escrow account. Instead of paying your property taxes when they’re due, the lender charges you more each month based on their estimation of what your next tax bill could be. Even if the county raises taxes, you’re protected because most of your tax bill has been set aside on your behalf.
The downside to property tax escrow is that it increases your monthly mortgage bill. Paying your taxes monthly might be a better idea, however, as it protects you in case you forget to plan ahead for a sudden, large expense. Many lenders require that taxes be paid through escrow.
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