What Happens When Property Taxes Are Not Paid?

 

There is a lot of misinformation around tax certificates and tax deeds. If you are curious about how the process actually works when property taxes are not paid, this article is for you.

When Are Property Taxes Due?

Property taxes in Tampa Bay are due in November, but you will not be charged any fees usually until April 1st. If you miss the deadline, the county will charge you about 5% of your past due bill as a penalty. Shortly after, is the tax lien certificate process.

 

Tax Lien Certificates

Because the county needs to receive its property tax revenue, they auction off what are called tax lien certificates. A tax lien is a lien placed on a property for an owner not paying his/her property taxes. A tax lien certificate is when an investor buys the right to receive the past due property taxes from the county, with interest.

What this means, is that investors bid on an interest rate and the lowest bidder wins. It is a reverse style auction which starts at 18%, and goes down from there. So if an investor buys a tax lien certificate against your property at 18%, you will owe your property taxes plus you will accrue 18% interest.

 

Here is a short example to sum it up:

  1. $1,000 Passed Due Property Taxes
  2. The County Assesses A Penalty Of About 5% Of The Past Due Taxes
  3. The County Sells A Tax Lien To An Investor At 18% Interest
  4. Homeowner Now Owes $1,000 + 18% (With The Roughly 5% Penalty As A Minimum)

 

Tax Deeds

In the event you do not pay your property taxes for 2 years after a tax lien certificate is owed, your property will be subject to selling at foreclosure auction. Once 2 years have passed, the tax lien certificate holder may foreclose the property and there will be a tax deed auction. At this point, the property will be foreclosed and will go to the highest bidder.

A common misconception is around what happens to mortgages and similar when a property sells at tax deed auction. If you have a mortgage, past due IRS taxes, or personal liens, these will usually follow you. Although some of these things will be “wiped clean” for the new property owner, it will not usually release you from having to pay them.

 

Conclusion

There is a lot more to past due property taxes, tax lien certificates, and tax deeds than in this short summary. Timelines and procedures change in different counties, different states, and may change year to year.

If you are past due on your property taxes and are interested in selling your property, give us a call. We would be glad to have the opportunity to help you and ease your way through a confusing process.

 

Extra Links:

Hillsborough County Property Tax Information

(link the text to: http://www.hillstax.org/services/services-real-estate-tax.aspx)

Pinellas County Property Tax Information

(link the text to: https://taxcollect.com/tax-faqs/)

Pasco County Property Tax Information

(link the text to: http://pascotaxes.com/taxes/tax-information/)

Extra Information On Tax Lien Certificates

(link the text to: https://www.investopedia.com/terms/t/taxliencertificate.asp)

Extra Information On Tax Deeds

(link the text to: https://www.investopedia.com/terms/t/tax-deed.asp)