Understanding Property Tax Liens and Sales

If you fail to keep up your property taxes (or other municipal charges, like a sewer or water bill) current, the past-due amount becomes a lien on your home. All states have laws that allow the local government to then sell your home through a tax lien process to collect the delinquent taxes. (To learn more, see What Happens If You Don’t Pay Property Taxes on Your Home.)

How Property Tax Sales Work

Each state has different laws for tax sales. Generally, the taxing authority, usually the county, doesn't have to go to court before holding a tax sale. Instead, the process is often started when the taxing authority files a list of delinquent taxes, which includes information about the taxpayer, the property, and the amount due, with the recorder’s office and publishes a copy in the newspaper. Also, the homeowner typically is entitled to some form of personal notice of the pending tax sale.

Then, in some places, the county holds a public auction. Commonly, bidding begins at the amount that covers the delinquent taxes, interest, and related penalties that are owed to the taxing authority. The winning bidder at the sale normally receives either a:

• tax deed, or
• tax lien certificate.

In some jurisdictions, though, a sale isn't held. The taxing authority simply executes its lien by taking title to the home. In other places, the taxing authority must foreclose the property, usually by filing a lawsuit in court, before holding a tax sale.

Tax Deed Sales

In tax deed sales, the taxing authority sells full ownership and possession rights to the home. The purchaser at the sale gets title to the property.

Tax Lien Certificate Sales

A tax lien certificate sale, on the other hand, does not convey ownership of the property. Rather, the taxing authority sells its lien and the purchaser usually receives a tax lien certificate. This certificate entitles the purchaser to basically take over the position of the taxing authority and collect full payment of the past-due taxes, plus interest, from the delinquent taxpayer.

If the delinquent taxes aren't paid by a certain date, the purchaser of the lien generally has a right to foreclose the lien, or take specific steps to convert the certificate to a deed, and get title to the home.