Behind on Property Taxes? What Happens and How to Fix It
If you're behind on property taxes, you're facing one of the most serious financial threats to homeownership. Property tax liens take priority over almost every other debt, including your mortgage. Ignore them long enough, and the county can seize and sell your property at auction, often for just the amount of taxes owed.
This comprehensive guide explains exactly what happens when you fall behind on property taxes, how the process works, what the county can do, and real options to resolve the situation before you lose your home.
Why Property Taxes Are Different From Other Debts
Property taxes aren't like credit card debt or medical bills. Local governments have extraordinary collection powers:
Priority Status
Property tax liens take priority over virtually all other liens, including your mortgage. If your property goes to tax sale, the tax lien gets paid first, potentially leaving nothing for the mortgage lender.
They Can Take Your House
Most creditors must sue you and get a judgment before they can seize assets. Property tax authorities can foreclose on your property without going to court in many jurisdictions.
No Bankruptcy Discharge
Property tax debts generally survive bankruptcy. Filing for bankruptcy protection won't eliminate what you owe in property taxes.
Interest and Penalties Compound
Property tax debt grows rapidly through interest (often 12-18% annually) and penalties (10-25% of the original amount).
Public Record
Property tax liens are public record, appearing on your credit report and affecting your credit score significantly.
How You Fall Behind
Property tax delinquency happens for various reasons:
Income Loss
Job loss, business failure, or reduced income means you prioritize other bills over property taxes, not realizing how quickly the debt grows.
Medical Emergencies
Healthcare costs drain savings, leaving nothing for property taxes.
Divorce or Separation
Financial disruption during divorce means property taxes fall through the cracks.
Rising Tax Bills
Rapid property value appreciation leads to shocking tax increases. What was $3,000 annually becomes $6,000, and you can't afford the new amount.
Escrow Problems
If you previously had taxes paid through mortgage escrow but then paid off the mortgage or refinanced without escrow, you might forget to pay taxes directly.
Inherited Property
You inherit property with years of unpaid taxes you didn't know about.
Simply Overwhelmed
The total amount owed feels insurmountable, so you freeze and do nothing, making the problem worse.
The Property Tax Collection Timeline
Understanding what happens and when is critical:
Year 1: Initial Delinquency
Taxes Due (usually annually or semi-annually)
Most jurisdictions bill property taxes once or twice yearly. Common due dates are January, April, July, or December depending on location.
Immediate Penalty Assessment
Miss the payment deadline and an immediate penalty is added, typically 10-25% of the original amount. A $3,000 tax bill becomes $3,300 to $3,750 overnight.
Interest Begins Accruing
Interest on unpaid taxes begins immediately, compounding monthly. Rates vary by state but commonly range from 12-18% annually. That's 1-1.5% per month.
Example: $3,000 taxes + $300 penalty (10%) + $360 first-year interest (12% annual) = $3,660 after one year.
Year 2: Compounding Problems
New Taxes Are Due
The next year's property taxes come due (often slightly higher than last year). You now owe both years' taxes.
Interest Compounds on Growing Balance
Interest is now charged on your full delinquent amount ($3,660 from year one + $3,100 in new current-year taxes = $6,760).
At 12% annually, that's about $810 in new interest, growing your total debt to approximately $7,570.
Warning Notices Intensify
You receive increasingly urgent notices, warnings about tax sales, and potential legal action.
Year 3: Tax Sale Proceedings Begin
Multiple Years Now Delinquent
You owe 3+ years of taxes, likely totaling $12,000-$15,000 or more with accumulated interest and penalties.
Tax Sale Is Scheduled
After a certain period (commonly 3 years but varies by state), the county schedules your property for tax sale.
Legal Fees and Costs Are Added
The county adds legal fees, administrative costs, and publication costs to your bill, often $1,500-$3,000 more.
Public Notice
Your property is publicly advertised for tax sale, listing your name and the amount you owe. This is humiliating and becomes public record.
Final Notice Period
You receive final notice of the scheduled tax sale date, usually giving you 30-90 days to pay everything in full or lose your property.
Types of Tax Sales
States use different methods to collect delinquent property taxes:
Tax Lien Sales (Lien Certificate Sales)
In tax lien states, the county doesn't sell your property. Instead, they sell the lien (your tax debt) to investors.
How It Works
Investors bid at auction to buy your tax lien. The winning bidder pays your back taxes to the county. You still own the property, but now you owe the investor instead of the county.
The investor earns interest on the amount they paid (often 18-24% annually, depending on state law). You have a "redemption period" (commonly 1-3 years) to pay the investor the full amount plus their interest. If you don't pay within the redemption period, the investor can foreclose and take your property.
States Using Tax Lien Sales
Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, West Virginia, Wyoming.
The Problem
Even after the tax lien sells, you still owe the money (now to an investor charging even higher interest). The debt continues growing. If you can't pay within the redemption period, you lose your property to foreclosure.
Tax Deed Sales (Property Sales)
In tax deed states, the county seizes your property and sells it directly at public auction.
How It Works
Your property is auctioned at the county courthouse or online. Investors bid on the property itself, not just the lien. The winning bidder gets the deed to your property. The county takes the auction proceeds, pays the tax debt first, and theoretically you receive any excess proceeds (though properties often sell for close to the tax debt amount).
States Using Tax Deed Sales
Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Kansas, Maine, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin.
The Problem
You lose your property entirely. Even if your house is worth $200,000, it might sell at tax auction for $15,000 (just covering the tax debt). You lose $185,000 in equity.
Hybrid Systems
Some states use combinations of lien sales and deed sales, or allow counties to choose which method to use.
Redemption Rights and Periods
Most states provide a "right of redemption" after tax sale:
What It Means
Even after your tax lien or deed sells, you have a specific period to "redeem" the property by paying the full amount owed plus interest, penalties, and costs.
Redemption Period Lengths
- Alabama: 3 years
- Arizona: 3 years
- California: 5 years (though sometimes 1 year)
- Florida: 2 years
- Illinois: 2.5-3 years
- New Jersey: 2 years (or up to 6 months in some cases)
- Texas: 6 months to 2 years
The Reality
Very few homeowners successfully redeem properties. By the time you're in redemption, you owe the original taxes plus years of interest, penalties, investor interest (often 18-24%), and fees. The total might be $20,000-$40,000, which most people can't pay in a lump sum.
What Happens to Your Equity
This is where tax sales become truly devastating:
What Happens to Your Equity
This is where tax sales become truly devastating:
Example Scenario
You own a house worth $250,000. You owe $180,000 on your mortgage. Your equity is $70,000.
You fall behind on property taxes and owe $12,000 (including interest and penalties). The county holds a tax sale.
At Tax Lien Sale
An investor buys your $12,000 tax lien. You have 2 years to pay them $12,000 plus 18% annual interest. If you don't, they can foreclose. Your $70,000 equity is at risk over a $12,000-$15,000 debt.
At Tax Deed Sale
Your property is auctioned. It sells for $25,000 (just above the minimum to cover tax debt, fees, and generate some profit for the buyer). The buyer gets a property worth $250,000 for $25,000.
The county takes $12,000 for taxes. You theoretically receive $13,000. But you still owe $180,000 on your mortgage, which is now unsecured debt. The mortgage lender comes after you for the full $180,000. You've lost everything.
This is the nightmare scenario
Losing a $250,000 house worth $70,000 in equity over a $12,000 tax debt.
Your Options to Resolve Property Tax Delinquency
If you're behind on property taxes, you have several options:
Option 1: Pay in Full
What It Is
Pay the entire amount owed (all back taxes, interest, penalties, and fees) in one lump sum.
Who It Helps
People who have savings, can borrow from family, or recently came into money.
The Reality
Most people behind on property taxes don't have $15,000-$30,000 in cash available. If you did, you probably wouldn't be delinquent.
Option 2: Payment Plan With the County
What It Is
Many counties offer payment plans allowing you to catch up on back taxes over time while staying current on new taxes.
How It Works
You contact the county tax collector and request a payment plan. If approved, you make monthly payments toward the arrears while also paying current taxes as they come due.
Example
You owe $12,000 in back taxes. The county might allow a 24-month payment plan: $500/month toward arrears plus staying current on new taxes ($250/month). Total: $750/month.
Who It Helps
People with steady income who can afford both current taxes and catch-up payments simultaneously.
The Reality
If you couldn't afford one year's taxes ($3,000/year = $250/month), how will you afford $750/month ($250 current + $500 catch-up)?
Payment plans sound good but often lead to default because homeowners can't afford the combined amount.
Option 3: Borrow the Money
What It Is
Get a personal loan, home equity loan, or refinance to pay off tax debt.
The Reality
If you're behind on property taxes, your credit is damaged. Most lenders won't approve loans. Home equity loans require equity and good credit. Refinancing a house with tax liens is nearly impossible.
Some "hard money" lenders will loan on property with tax problems but charge 10-15% interest and high fees, potentially making your situation worse.
Option 4: Sell the Property
Traditional Sale
List the property with a real estate agent, sell it, and use proceeds to pay off tax debt.
Problems
- Takes 3-6 months (you might not have that much time)
- Requires making repairs
- Tax liens must be disclosed, scaring away buyers
- If tax sale is scheduled soon, you can't complete traditional sale in time
Direct Sale
Sell as-is to a direct buyer who can close quickly and pay off tax debt at closing.
How It Works
Contact a buyer who specializes in tax problems. They evaluate your situation and property. They make an offer. At closing, they pay off all tax debt, liens, and penalties. You're free from the burden.
Advantages
- Very fast (close in 7-14 days)
- Buyer handles paying off all tax debt
- No repairs needed
- Works even if tax sale is imminent
- Often includes moving assistance
Trade-Off
You won't get full market value, but you avoid losing everything at tax sale. You preserve whatever equity exists after paying off taxes and any mortgage.
Option 5: Let It Go to Tax Sale
What It Is
Give up and let the county sell the property at tax sale.
When This Happens
Some homeowners feel so overwhelmed they do nothing, and the property goes to tax sale by default.
The Result
You lose the property and all equity. If you had a mortgage, the lender comes after you for the remaining balance. Your credit is destroyed. You walk away with nothing.
This Should Be Last Resort
Even if you have no equity, selling to a direct buyer is better than tax sale because you avoid the credit damage and potential deficiency judgment from your mortgage lender.
Special Situation: Both Mortgage and Tax Delinquency
Many homeowners fall behind on BOTH mortgage and property taxes simultaneously. This creates a complex situation:
The Problem
You're facing foreclosure from your mortgage lender AND tax sale from the county. Both clocks are ticking.
The Solution
Some direct buyers specialize in resolving both problems simultaneously. They take over your mortgage payments through subject-to arrangement AND pay off your tax debt at closing.
This resolves both threats at once, stopping foreclosure and tax sale, giving you a fresh start.
Don't Wait Until It's Too Late
The biggest mistake property tax delinquent homeowners make is waiting too long:
"I'll catch up eventually"
Interest compounds monthly. Penalties don't go away. The longer you wait, the more you owe.
"They won't really take my house"
Yes, they will. Tax sales happen every month in every county across America. This isn't an empty threat.
"I'll deal with it later"
Later becomes years later. By then, you owe twice as much and you're weeks from losing your property.
Take Action Now
If you're behind on property taxes:
Step 1: Know Exactly What You Owe
Contact your county tax collector and get the full amount including all interest, penalties, and fees.
Step 2: Know Your Timeline
Find out if a tax sale is scheduled and when. This determines how much time you have.
Step 3: Evaluate Your Options Realistically
Can you really afford a payment plan? Can you borrow the money? Can you sell in time?
Step 4: Act Immediately
If tax sale is approaching and you can't pay in full, contact a direct buyer who specializes in tax situations. Close quickly and resolve the problem before you lose everything.
Moving Forward
Property tax delinquency feels overwhelming, but it's solvable. The key is acting before the tax sale occurs.
Losing a $200,000 house over a $15,000 tax debt is tragic and unnecessary. With the right solution, you can resolve the tax problem, preserve whatever equity exists, and move forward without the crushing burden of tax delinquency.
Don't let embarrassment or denial cause you to lose your property. Reach out for help, explore your options, and take action while you still have options.
October 7, 2025