Q&A: Losing Home to Tax Sale

Q. I am behind on my property taxes and wonder can someone just pay my taxes and take my house? Surely that is not possible, but a friend has warned me that it is something I should be worried about.

A. The short answer is YES, you can lose your home because you did not pay the property taxes. However, it is not something which could happen without you receiving notice and having ample time to resolve the problem. Let me explain.

While it is true that a person can lose their home because they failed to pay the property taxes, that usually will not become an issue unless you are at least 2 or more years past due with the taxes. Property taxes are mandated under state or local municipal law and are collected by an office which has the authority to do so. The name of the office may be tax assessor or tax collector or similar. In addition to collecting taxes when due, this same office has the authority to:

1. Place a lien against any property owner who has not paid the appropriate taxes for an extended period of time (and the amount of time will vary from municipality to municipality, set by local law)
2. Notify the owner that the property will be made available for sale due to unpaid taxes, if the problem is not corrected within a specified period of time
3. Proceed to offer the property for sale at an auction specifically for the purpose of collecting unpaid taxes
4. Advertise the availability of the property for past due taxes and complete the sale at the designated time

*Some folks have gotten wealthy by acquiring property in this manner because the prior owner was not aware of their redemption rights.

Many states have a redemption period during which you can reclaim your property by re-paying the amount of the tax bill, court costs and any other applicable costs. This redemption period may be as short as 6 months or as long as 2 years. You will need to check the statutes in your city/state. It is important that you keep abreast of your tax situation, even if you are not able to make the regular mortgage payment.

My experience has taught me that the individual most likely to be unaware that their taxes have not been paid is someone who had a mortgage with taxes included as an escrow item and then refinanced.

When they processed the refinancing, no escrow account was set up for the payment of the taxes so the individual who has not been in the habit of paying taxes simply ignores the tax BILLS they have been receiving believing that they are the tax NOTICES/RECEIPTS which they are accustomed to getting. Their taxes fall further and further behind until the appropriate authority utilizes the process outlined above to collect the taxes.

Please take the time immediately to verify your actual tax situation; you may even be able to make partial payments to the taxing authority to avoid losing your home in this manner. Yes, you may have the right to get it back, but better to keep it in the first place.

Good luck!

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Reinstate and Redemption: Worlds apart

FACT: The two words have dramatically different meanings. To reinstate a loan means that the consumer is behind on their mortgage payment but has arranged with the bank to catch up the past due amount. Even though the lender has accelerated the loan (demanded payment in full along with all applicable costs and fees) the lender reserves the right to allow a re-instatement if they so choose. Most often the lender will decide this is a reasonable option in order to avoid a foreclosure if the consumer’s situation has changed and it appears likely that payments will be made in the future in a timely fashion. The amount needed to reinstate usually includes all past due payments, interest and may include attorney fees. Once the borrower has reinstated the loan, they resume payments just as they had before the default.

On the other hand, redemption typically means that the borrower must pay the entire amount of the loan plus all costs including attorney fees in order to re-claim their home AFTER the foreclosure has been completed. A consumer’s right to redemption, including how long they have in order to exercise this right, is determined by state statutes. What fees the lender is able to collect is governed by the terms of the mortgage note or the deed of trust. Redemption timeframes vary from a very short period of time which expires at the time of the sheriff’s sale or may continue for a matter of months. The longest redemption period in the country (related to foreclosure due to failure to make timely mortgage payments), is 1 year, in the state of Alabama.

Watch for a section on State foreclosure laws which will include redemption timeframes which will be included on the Home Ownership Matters website by the end of April under the Foreclosure section. Share the knowledge with your friends.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

Q&A: Sheriff's Sale/Redemption

Q.  We have been trying to save our house from foreclosure but could not come up with enough money to stop the bank from foreclosing. We have just received notice of the sheriff’s sale for next month. We are not sure what to do. Are we supposed to go the sale? How long do we have to stay in our house now that the sheriff’s sale is scheduled? Seems just when we think it can’t get any worse, it gets worse.

A: Foreclosure sales are all too common these days. First, there is no real need for you to attend the sale. If you have been able to pull together enough money to redeem your home (and keep it), then you would have needed to make arrangements PRIOR to the sale date. 

The exact amount of time will depend on the foreclosure laws in your state and specific redemption rights. These vary from state to state. You may have until the day before the sale or it could be that you must pay several days before the sale. A few states will allow you a redemption option even after the actual sale has been completed, whether someone bought the home or not.

Typically, on the day of the sheriff’s sale the clerk of the court (or trustee) will conduct a very formal process of offering the listed properties at a minimal amount preset by the mortgagee as a starting bid. The amount which can be received will also be impacted by local foreclosure guidelines. Bidders must have provided documentation that they can complete the transaction within a short period of time (perhaps 30 days +/-) and will typically have to bring guaranteed funds for at least 10% of the amount they are prepared to bid.

The amount of time you will have to stay, after the sheriff’s sale, is also determined by state law. There is no universal answer of 10 days or 30 days across the country. Find out what the timeframe is in your city. If you are unable, financially, to move without some help, please be aware that you are very likely to be approached by a representative from the lender or servicer, or even a new buyer, within a few days after the sale wanting to know when you will vacate. Asking them to help you in the form of “cash for keys” is a good option. You may be able to get as much as $1000 to $1500 in most parts of the country to help you move on. Cash for keys can be paid to tenants as well.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)