Tax Foreclosures

Written by Stephanie Dula
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Properties become tax foreclosures when owners fail to pay property tax on their home for a certain amount of time, which varies by state. Like mortgage lenders, local governments can move to foreclose on the home in order to repossess the home and sell quickly to recoup losses. However, lenders of the original mortgage loan must first be satisfied before the public sale of the home.

State Tax Foreclosure Methods

Those who are interested in purchasing these properties will be well advised to know the ins and outs of their particular communities' practices regarding foreclosure for unpaid taxes. State and local governments vary widely in their approach to collecting unpaid property taxes. There are two major types of tax foreclosure processes: judicial and non-judicial.

Much as its name implies, the judicial process involves the court system, who ensures that all parties with a relevant interest have been notified of the foreclosure and subsequent auction. In a non-judicial process, it will be left up to the tax collector's office to notify all parties and independently conduct a public auction. Local tax foreclosure auctions may be advertised in much the same way as mortgage foreclosures.

Since a tax foreclosure involves a property lien in addition to the outstanding mortgage balance, obtaining title insurance is necessary to protect all parties. This will involve a thorough examination of all public records regarding all liens against the property. An investor will need to be certain that all the property's financial obligations can be met and a profit made through a future sale of the house.


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