Foreclosure for Real Estate Taxes 

Foreclosure for Real Estate Taxes 

FORECLOSURE FOR REAL ESTATE TAXEA little know fact is that homeowners can face foreclosure from delinquent real estate taxes, (municipal liens).  These foreclosure actions can be initiated for nominal amounts and then spiral into thousands of dollars of debt because of interest, attorney fees, and costs, ultimately threatening you with the loss of your property.  This section will discuss these different types of foreclosures, the process, and what you can do about it! 

Real Estate Tax Foreclosures 

The majority of homeowners have their real estate taxes paid yearly by their mortgage companies through their “escrow account”.  There are, however, homeowners who do not have escrowing mortgages, and/or who have no mortgage at all and are required to pay their real estate taxes directly to their Town tax collector.  If you find yourself behind in making payments to your tax collector, you are setting yourself up for a tax foreclosure.  This is a statutory foreclosure process wherein your town is empowered to foreclose on your property in order to resolve the delinquent taxes.  Due to their statutory nature they are endowed with special enforcement and collection powers, such as the following:

  • Most importantly, delinquent real estate taxes incur a huge 18%  interest rate daily on all taxes owed.  This amounts to 1.5% every month; (e.g. a $10,000 tax bill grows at $300 every month.)
  • All real estate taxes take priority status over your mortgage and could foreclose on both you and your mortgage company. 
  • Real estate taxes are paid retroactively, thereby continuing the cycle of perpetual, unnecessary default until you pay the bill in full.  The homeowner thinks they are paying their current tax bill only to find that their payments are not being properly credited. 
  • Incur attorney fees and costs at the same rate as mortgage foreclosures increasing the amount of debt owed as soon as the foreclosure is commenced. 
  • Delinquent taxes are often due in full, as settlement options are not available.

With the special treatment legislated for tax liens, the resolutions of these foreclosures are tipped in favor of the tax collector and never the homeowner.  Overdue real estate taxes are a sure sign of financial trouble that needs professional attention.  Don’t go it alone.

Real Estate Tax Foreclosure Process

Homeowners who are behind on their real estate taxes will be served by a sheriff/marshal with a writ, summons, and complaint.  This is usually left at the homeowner’s residence, and not personally served.  This begins the foreclosure process, and it is the time to seek specialized legal assistance.  All summonses contain a Return Date, starting the process that requires the homeowner to respond to the foreclosure action.  Since Homeowners are not knowledgeable about the foreclosure process they can easily miss any deadline which triggers the next step, Defaults.  

Default orders enter when the appropriate responses, such as Appearances and Answers are not filed with the court timely and/or homeowners don’t present the proper defenses.  Default Orders expedite the foreclosure process and bring the homeowner one step closer to losing their property.  Obtaining experienced legal assistance in fighting foreclosures will ensure that defaults do not enter against you and ensure all proper defenses are asserted on your behalf.  

Without resolution of the real estate taxes, the foreclosure will ultimately get to a court hearing and a Judge will enter a Judgment of either Strict Foreclosure or Foreclosure by Sale, depending on the equity in the property.  This judgment will list a date certain that title to the property will be lost by the homeowner.  If a Judgment of Foreclosure has entered you need to seek legal help immediately, since any delay at this point in the foreclosure process will result in the loss of the property. 

Don’t despair!  There are proven solutions to this type of foreclosure and ways to save your home after the commencement of the foreclosure action.  

Third Party Tax Foreclosures

An often confusing occurrence with tax lien foreclosures is that the homeowner is unaware of who is actually foreclosing on their property.  In many cases, delinquent tax liens are purchased by private debt buyers from the Town.  Tax Debt Buyers purchase large amounts of delinquent municipal liens and then aggressively pursue foreclosure with little negotiation.  Homeowners will often attempt to work out a payment plan with their Town only to find out they must deal with these Third-Party Buyers, thereby adding another level of confusion.  Tax debt foreclosure can often involve two sets of bills – bills due to the Tax Buyer and bills still due to the Town.  Since these liens have huge interest rates and statutory protection, Debt Buyers know they can foreclose quickly for small amounts while profiting off of the high-interest rates charged on all real estate taxes.  

Dealing with Tax Debt companies can be daunting, but hiring the appropriate legal team to fight for you will prevent these Debt Buyers from winning!

Foreclosure Resolution for Real Estate Taxes 

Once a homeowner has been served a foreclosure action for delinquent real estate taxes it is imperative that they contact an attorney immediately as there are proven legal options available to halt the foreclosure and fix the problem.

  • Voluntary payment arrangements can be entered into if they are agreed to by the Tax Collector and/or Third-Party Buyer but often require 6-to-12-month repayment plans which may be unaffordable to the homeowner. 
  • In some cases, the homeowner’s mortgage company may payoff the delinquent real estate taxes but this causes a foreclosure by the Bank.
  • Chapter 13 bankruptcy is a federal law that stops foreclosure immediately and provides a five-year repayment plan. This also assures those ongoing payments remain current and stops the cycle of default, along with excessive fees and costs. 

If you find yourself served with a foreclosure for real estate taxes make sure to act promptly and contact an attorney.  The Law Offices of Neil Crane have been fighting tax foreclosures for the last 37 years and know how to resolve these types of taxes,  we know the foreclosure process, and we have the answers on how to save your home!