Tax Deed Sales - Giving Deliquent Taxes Hard Time

When you can no longer maintain your monthly mortgage payments and real estate taxes, you risk losing your real estate to the government through foreclosure. Once your real estate taxes have entered the late stage of delinquency, paperwork can be filed against you by the government or by other interest holders in your property to have you evicted. You will be giving proper notice, typically through the local sheriff's office, if the situation proceeds that far. Once you've officially lost the property, it is offered for sale to the general public at an auction. The final bidder on the house will be paying the full amount of your backlogged taxes, interest on these delinquent payments, and any additional costs incurred through the property's sale.

If your property is found undesirable at the auction and no bidders emerge, the government will seize and own your property. The government will transfer the title from you to themselves typically through legal maneuvers such as quitclaim deeds or sheriff's deeds. Directly afterwards they will probably enact a quiet title action to expunge any remaining interest you have in the property, stripping you of ownership completely. The quiet title action will also enable them to receive title insurance, which also bolsters their claim to the property.

Some states set aside a grace period where you as the former owner can reclaim the property simply by raising the amount of money requested at the auction sale plus a hefty penalty fee. States such as Texas allow a "redemption period" of six months for residential properties and two years for agricultural properties, with a ten percent penalty. As a result, most homeowners in Texas who purchased the property at a tax deed sale do not begin home improvements right away - the property could still change hands back to the original owner.

Another way for the government to handle sales of foreclosed and seized properties is through a tax lien sale. During this sale the government sells off your delinquent tax debt to investors at an auction. During the sale, the investors try to bid each other out to accept the lowest rate or return. Investors are also looking to pay high premiums on the liens. Certain states even use random computerized systems to give bidders chances at the tax liens. Other states use rotational selection to offer the liens to a stacked list of investors sequentially. If all the liens are not sold during the auction, the government buys these "struck" remainders.

One benefit to the original owner during a tax lien sale is that there is a gracious redemption period where the lien owners cannot contact the original property owner to demand repayment or threaten with foreclosure. Once this grace period is over, the lienholder may initiate foreclosure, and attempt to gain title tot he property through quitclaim deeds or a tax deed sale. In states such as Illinois, a tax deed sale automatically removes all clouds from the property and grants clear title.