The Legal Process of Texas Property Tax Foreclosure


When property taxes go unpaid in Texas, the owner risks a foreclosure and forced sale by local government. The statewide rules cover the procedures and timing of auctions, at which members of the public can bid on foreclosed homes. The owner who is unable to solve a tax liability can appeal the foreclosure or file for bankruptcy.

Tax Deed Sales in Texas

The state of Texas provides for tax deed sales on properties that are delinquent. The statutes set the first Tuesday of the month as the date for these sales, which each county administers. The minimum bid includes all overdue taxes, plus interest and penalties, as well as fees and costs incurred by the county. The highest bidder takes possession of a tax deed from the county sheriff, as well as the right to foreclose on the property at a future date if the owner is unable to meet his tax obligation.

Redemption Period

Texas law allows the owner of homesteaded or agricultural property a two-year redemption period. This gives the owner time to make the overdue tax payments before the holder of a tax deed can foreclose and take possession. For non-homesteaded property, the redemption period is just six months. When the redemption period expires, the holder of a tax deed takes legal possession of the property. After this occurs, however, the previous owner is given another six-month grace period to pay the overdue taxes.

Reimbursement Rate

If the owner manages to clear the tax bill, the holder of a tax deed is entitled to a reimbursement of 25 percent of the amount she paid. This is a fixed rate that applies whether the owner took a single day or two years to make good on the taxes. Although the return on the investment might seem attractive, the counties make no guarantees about the condition of the properties sold at tax deed auctions. Bidders must carry out their own due diligence, including title searches and inspections, and have no recourse if the market value of the property ends up less than the amount they paid for the tax deed.

Filing for Bankruptcy

By declaring bankruptcy, a property owner may be able to prevent foreclosure by the holder of a tax deed. The filing of a bankruptcy petition results in an automatic stay that prevents any creditor action against the assets of the debtor. However, liens placed on the property by federal and state governments take precedence, and liquidation of the debtor's property may result in seizure and sale of the home to make good on the homeowner's debts, such as a mortgage. The holder of a tax deed, even with a redemption period expired and a legal right to the property, would have to get in line with other creditors for any payment of his claims.

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