Foreclosure on a home can happen for a variety of reasons. A tax lien foreclosure, also known as a lien sale, is a specific type of foreclosure action that is brought by the government against a property owner for failure to pay any necessary taxes.

Depending on the type of property and the facts of a case, this could involve failure to pay property taxes, as well as state and federal income taxes.

In the event that a tax lien foreclosure occurs, the tax lien may be sold by the state to recover any outstanding taxes owed by the property owner on a particular piece of real estate.

During the tax lien foreclosure process, a lien on the property may also be offered to potential investors through a public auction. This differs from other types of foreclosure actions, such as a foreclosure by power of sale, where the home is sold privately by a mortgage lender.

Additionally, tax lien foreclosures often allow bidders from outside of the region to place bids via online auctions. A tax lien foreclosure is only one of the two primary methods used by government agencies to address delinquent taxes on a piece of real estate. For reference, the other kind is called a “tax deed sale.”

Finally, it is important to know that tax liens will show up on a person’s credit report, which can also have a negative effect on their credit score. Having a lien on the property also prevents the property owner from selling or refinancing it. Ultimately, the lien will remain attached to the property until any debts or outstanding taxes are officially paid off.

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

In some instances of tax lien foreclosure actions, a property owner may potentially be granted a “redemption period.” A redemption period is a specific amount of time that is allotted to the property owner as an extension to repay the lien, along with any other fees that may be owed like penalties or accrued interest. It is usually a range of anywhere from three months to three years.

During this grace period, a lien holder is not allowed to contact the owner of the property, demand payment from them, or threaten any further legal actions against the property owner. A lien holder is also not permitted to contact other interested parties, such as a mortgage lender. This may vary according to the laws of each state.

Depending on the laws of a particular jurisdiction, the lien holder may also have to perform specific duties during the redemption period. For example, a lien holder may be required to pay any remaining unpaid property taxes while the property owner is shielded by the guidelines of the redemption period.

If it is the lien holder who does not pay taxes during the redemption period, then they could lose their lien certificate, which means that another person may be able to “buy out” their interest.

What Happens After the Redemption Period Ends?

When the redemption period concludes or expires, the lien holder is then allowed to initiate the actual foreclosure proceedings, but will usually have to pay any court costs related to the legal action.

Generally speaking, tax lien foreclosure actions typically result in favor of the interested investor, which means they will acquire the property. Alternatively, a tax deed sale is another consequence that may result from the action and will grant the lien holder the right to make the first bid.

In some cases, the outcome of the foreclosure proceeding may be contested or appealed by the property owner. This is especially true when some sort of error or violation, such as fraud, arose during the hearing.

For instance, if the state accidentally issued a lien on the property in error under state laws, they will usually reimburse the property owner, but typically at a lower interest rate.

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

A tax lien foreclosure is a very specific type of foreclosure proceeding. Due to the involvement of the state or federal government, tax lien foreclosures can become quite complicated and are often extremely difficult to challenge. Therefore, if you think you need help with a tax lien foreclosure, you should strongly consider hiring a local real estate lawyer.

A qualified real estate lawyer will be able to help with the proceeding, can provide further legal advice about your matter, and represent you in court if it is necessary.

Additionally, if you are potentially facing a foreclosure action, but it has not actually happened yet, an attorney will be able to review your property documents to determine whether or not your property can legally be foreclosed on and if there is any way that foreclosure can be avoided.

If any of the above information seems like it applies to you or your situation, then it might be in your best interest to contact a real estate lawyer immediately.