A tax sale occurs when a piece of property is sold in order to collect on unpaid property taxes. In most cases, this is real property being sold, such as a home or a business building. Tax sales are a specific type of foreclosure process that is initiated by governmental agencies rather than by a bank or a loan company.
There are two main types of tax sales:
- Tax deed sale– The property itself is sold to the highest bidder at an auction in order to collect on the tax payments.
- Tax lien sale- The governmental agency sells a tax lien interest in the party, usually in the amount that is owed in taxes. Sometimes, the liens can be sold online in a manner similar to other security interests.
There are many steps that must be followed in each of these types of tax sales. If any of the procedures are not followed, it could lead to further complications in the legal process.
Tax sales can be complicated processes, as they may involve a mix of different state and local real estate and tax laws. Some legal issues that commonly arise in a tax sale include:
- Marketable Title: The property title must be fully marketable in order for the property to be transferred, especially in a tax deed sale. This means that issues such as a lien or title defect must be cleared up before the property can be legally transferred.
- Notice: The landowner who owes property taxes must be informed by the government agency before the proceedings can begin. This is especially true for tax liens, since the liens may be sold online rather than in-person. The property owner must also respond to the notice put out by the collecting agency.
- Spousal Issues: Nuptial agreements may place limits on the amount that the government can collect. One example would be when it can be shown that the other spouse is solely responsible for the property tax debt.
- Exceptions: The government might grant an extension of the proceedings for unavoidable absences and undue hardships.
Many jurisdictional statutes provide the property owner with a “right of redemption.” This is involves a “redemption period” in which the property owner can redeem their property after it has been sold in a tax sale auction. Depending on the state, the time period can range anywhere from six months to a year. The person must follow strict requirements in order to redeem their property and re-obtain title. For instance, the person must usually pay the amount that was paid at the auction, plus other fees.
Tax sales can be very complicated procedures. You may need to hire a real estate lawyer if you are facing any challenges regarding a tax sale. A lawyer can provide you with legal advice and guidance regarding the laws in your area. Also, if you need to file a legal proceeding, or if you need to contest a tax sale, your lawyer can provide representation during those times as well.