Tax Lien Foreclosure

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What Is a Tax Lien Foreclosure?

Foreclosure on a home can happen for many different reasons. A tax lien foreclosure, or tax lien sale, is a specific type of proceeding conducted by a state or local government agency. In a tax lien foreclosure, a tax lien may be sold by the state for delinquent taxes on a particular piece of real estate. 

During the tax lien foreclosure process, the lien on the property may be offered to potential investors through a public auction. This is different from other types of foreclosure such as a foreclosure by power of sale, where the home is sold privately by the mortgage lender. Tax lien foreclosures often allow bidders from outside of the region to place bids through internet auctions. 

Tax lien foreclosure is one of two types of methods used by government agencies to address delinquent taxes on real estate (the other is called a “tax deed sale”).

What Is the “Redemption Period” in a Tax Lien Proceeding?

In some tax lien foreclosure proceedings, the property owner may sometimes be granted a “redemption period.” This is a specific period time in which the lien and other fees may be repaid. During this time period, the lien holder (the potential investor) isn’t allowed to contact the owner of the property, demand payment, or threaten any further legal actions. Also, they may not contact other interested parties, such as a mortgage holder. The specific rules depend on the jurisdiction. 

In some jurisdictions, the lien holder also has duties during the redemption period. For instance, they may be required to pay any subsequent property taxes that are unpaid during this redemption period. If they fail to pay taxes, they might lose their lien certificate, and another person may be able to “buy out” their interest.

What Happens after the Redemption Period?

When the redemption period is over or expires, the lien holder is then allowed to initiate the actual foreclosure proceedings. The lien holder must usually pay court costs for the proceeding. The tax lien foreclosure proceedings generally result in the interested investor acquiring the property. Alternatively, a tax deed sale may result, with the lien holder having first bid. 

In some cases, the results of the foreclosure may be contested or appealed. This is especially true if there was some sort of error or violation (such as fraud) involved in the hearing. For instance, if the state accidentally issued a lien in error under state laws, they will usually repay the property owner (often at a lower interest rate however).

Do I Need a Lawyer for Help with a Tax Lien Foreclosure?

Tax lien foreclosures are a very specific type of foreclosure proceeding. Due to the involvement of the state, tax lien foreclosures can be complicated and often are difficult to challenge. You may wish to hire a qualified lawyer in your area if you need assistance with a tax lien foreclosure proceeding. Your attorney can provide you with sound legal advice and representation during the court hearings. 

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Last Modified: 06-03-2015 03:18 PM PDT

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