Eclectic Homes

Could a Property-Tax Lien Cause a Foreclosure?

October 28, 2019

Owning a house brings many financial responsibilities. Some of the most crucial are paying a house mortgage loan and paying real estate taxes. Failing to cover either may bring dire consequences for homeowners, but many homeowners learn more about the probable consequences of defaulting on mortgage obligations than about what occurs when a property tax bill goes unpaid. In instances of financial hardship, some homeowners might opt against paying property taxes in favor of making a mortgage payment, but there are consequences.


Tax exemptions are attached to real estate when property and income taxes are unpaid. The tax lien is a legal document that states the lienholder has a financial claim on the house. The tax lien is characterized by a dollar amount. The lien is dropped in the event the home owner pays the amount due. If a homeowner sells the home, the tax lien is paid at closing in the homeowner’s equity. If the lien isn’t paid, other action is taken to guarantee the debt, and this activity may include foreclosure on the house.


Homeowners face possible foreclosure for non profit of multiple kinds of tax. Nonpayment of county property taxes often leads to a tax lien. These liens sometimes lead to foreclosure. The federal government and some state authorities also utilizes tax liens to secure payment on revenue taxes. Some programs used by local and state authorities allow homeowners to avoid or remove a tax lien without even paying the entire amount of the debt.


Tax foreclosure on a tax lien occurs if the homeowner doesn’t respond to the lien by paying it. To avoid a tax deduction, homeowners must pay more than the initial quantity of the tax bill. Besides fees for late payment, the IRS and state and county tax collectors recover the costs of securing the lien. Sometimes, tax exemptions lead to tax-certificate sales. These earnings allow investors to inherit the debt. The investors bid on how much interest they’ll accept about the tax debt, and homeowners must pay interest in addition to the debt originally owed under the tax lien. When homeowners don’t cover these investors, the investors may request a foreclosure sale. The buyer then receives payment from the new buyer.


To investors, tax certificates aren’t offered in California. Instead, a levy is placed on property once the property owner fails to pay off a tax lien. A levy gives the taxing body possession of the house. The taxing body subsequently prepares to sell the house at auction. In states where tax certificates are offered, the holder of a tax certificate can start foreclosure on a home when a tax certification has not been paid after a certain period of time. In New Jersey, the house owner has two decades to cover the debt. The residence is offered at public auction through the foreclosure process and the maximum bidder takes complete ownership of the property.

Time Frame

For a foreclosure to occur following a tax lien is attached to the house, certain deadlines must pass. In California, as an example, property owners are given 30 days to cover overdue property taxes until the tax lien is recorded. These notices include details about how to avoid the lien. In states where investors purchase tax certificates, there are prerequisites for how long homeowners need to cover their debts before the holder of the tax certificate can request foreclosure.The Internal Revenue Service, by law, can continue to keep a tax lien in place for just 10 years. The IRS, though, can also seek out a tax levy to recoup the costs. A tax levy permits the IRS to seize the house. The IRS subsequently sells the seized property. Even though the IRS has jurisdiction to seek a tax levy at any stage, the government agency often waits until the 10-year window to the tax lien is all going to close before taking such action.


Many homeowners think mortgage lenders cannot foreclose when timely mortgage payments are made. But, mortgage companies have the right to foreclose on properties when a tax lien is attached to them to secure their investments. According to a June 2010 narrative from the”St. Petersburg Times,” the Federal Housing Administration and giant mortgage lender Fannie Mae are instructing their mortgage financing partners to commence foreclosure when homeowners don’t pay property taxes and house insurance. According to the narrative, foreclosure is especially being urged for reverse mortgage financing.

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