Owning a home can be a financial asset. However, it is almost always accompanied by the responsibility of paying property tax. A home may be taxed by the state, county and city in which it resides. Because property taxes support important local infrastructure, failure to pay such tax is considered a serious offense and can result in the government seizing and auctioning an individual's home.
When an owner fails to pay taxes on his home, the state or federal government can impose a lien, or claim, on his personal property to receive the back taxes owed. A tax lien can be attached to all personal property owned by the owner of the home, which includes the house, car and any property within the home, as well as property obtained after the lien is issued. A tax lien is often reported to creditors and may affect an individual's ability to secure credit in the future.
If you are behind on your property taxes, your local government is required to send you notification. Should you fail to pay the outstanding taxes owed within the grace period after notification, a lien may be put on your home. Your mortgage lender is then notified of this lien. When back taxes are not paid within the specified time frame, the home is typically seized and put up for public auction, where it may be sold to the highest bidder.
Right to Redemption
Depending on where you live, you may have the right to redeem your home after it has been seized by the government. Most states that allow this provide a 180-day redemption period, during which time the owner may pay any back taxes plus interest and fees to reclaim ownership. If the homeowner does not reclaim the property during this time, the government can initiate foreclosure of the home, making it available for bidding from other investors.
Once a home is available for auction, the home is usually bought by an investor or private party. When this happens, a quit-claim deed is typically issued by the government or lien holder, which marks the legal transfer of the property to the buyer. Because a quit-claim deed does not guarantee that the title is free and clear, the purchaser of the property may not necessarily have a guaranteed claim to it, which could provide you or your legal inheritors with an opportunity to re-assume the title through legal action. To avoid a tax lien, property owners should make every effort to pay such tax in a timely manner.