Tax Foreclosure Information

Tax foreclosure occurs when a homeowner fails to maintain property taxes on their residence. In most counties, homeowners pay property taxes semiannually. While many foreclosures occur because homeowners fall behind on their mortgage payments, government agencies can also foreclose on a property due to a lack of tax payment. As a homeowner, or an investor, it is critical to understand the role taxes play in property ownership.

Defining Foreclosure

Foreclosure occurs when a property owner fails to make required payments to maintain their homeownership. A common type of foreclosure is failure to pay on a mortgage. In this instance, the lender may foreclose on the property, stripping the homeowner of the property then selling to recoup the lost cost. Government tax agencies may also foreclose on a property owner when the owner fails to make payments in a timely manner. The government agency confiscates the home and then sells it.

Tax Lien Filing

When a homeowner is late in paying property taxes, the government agency has the ability to file a tax lien against the title of the property. The agency may file the claim if the individual is behind in personal or real estate taxes. The Internal Revenue Service files tax liens on property due to failure to pay federal income taxes. County governments file tax liens for failure to pay property taxes.

Process

The process of tax foreclosure is different depending on the agency filing it. The Internal Revenue Service first assesses the liability of the debt. Then, it sends out a notice and demand for payment. At that time, the full amount, including any penalties and interest, is due. The property owner has 10 days to comply with payment. Most government agencies follow a similar process prior to filing the tax lien and foreclosing on the property.

Sales of Tax Foreclosures

When taxes do not receive proper payment within the stipulated time, the agency forecloses on the property. This involves legal action in which a court awards the property to the agency due to failure to pay taxes. The IRS sells property seized in foreclosure at tax foreclosure auctions. Most counties also use auctions to sell properties, or to sell the tax lien on the property.

Avoidance

To avoid tax foreclosure, homeowners must maintain payment on all taxes owed to the city, county, state or federal government. A homeowner who does fall behind on taxes should contact the government agency immediately to make payment arrangements. Most agencies do work with homeowners to get them caught up.

References

• RealtyTrac.com
• U.S. Department of Treasury