Real Estate Taxes - TAX SALE - What is it?

A friend of mine has paid real estate taxes religiously and ontime on his house for years via escrow, until this year, when he ran on hard times. The last date for payment and interest due for this year is fast approaching, and they mentioned that if it's not received by that date, it will go into "tax sale". As I understand it, he will NOT lose his house....his taxes will be sold to a bidder (not sure of the process), and he will then owe the bidder the past due amount AND an additional percentage of interest to the winning bidder...and would then have "x" amount of time to pay that off. Am I correct about all of this? He will NOT lose his house? Thanks!

Public Comments

1. County and state taxes proside over morgages, so with the tax sales you would pay the past due taxes (and interest if added in) for the purchase of real estate, free and clear. It is a great investment opportunity if insurance isn't outrageous. Now if they auction his home off, it seems to me that the person/business that pays off everything is the deed holder and they can assume the property in their posession if he doesn't get them paid. They are probably under a signed agreement to give him a chance, but if he fails, they are the legal deed holders.
2. Not if he pays off the tax lien certificate. Many states sell such tax certificates. The certificate buyer pays the tax & the owner must then pay buyer the tax plus some amount of interest -- which may be fixed or varied depending on state law. He only has a fixed period of time to do so or the buyer will indeed get the house or force a tax lien sale (depending on state law). The time varies. For instance in Fla. tax certificates are sold on June 1st following the year the tax is due and the buyer must then wait 2 years from the date of sale to foreclose; so a delinquent taxpayer has some 30 months to pay the taxes -- tho' there is by then a pretty big interest bite (as much as 18% per year).
3. Unfortunately, he can lose his house. It would be similar to a foreclosure sale if he defaulted on his home loan. There are some things to consider though that might help your friend out. First, it takes time to put a property up for sale like this, how long depends on your areas laws. Second, he may be able to make arrangements with the local tax assessor to pay off his bill in installments. They would probably charge interest, but that would probably be better than losing his property. Third, if he has a loan on the property, he should see if there is anything that his lender can do to help him. The reason behind this is that if the property were sold to satisfy the tax debt, the bank would not have any collateral with which to receive payment for the money they have lent. More than likely, the bank's loan (if there is one) is going to be for a larger amount than the amount due on the taxes, so they have a lot to lose. I hope some of this helps your friend out. Good luck.