Back Property Taxes

Any of us that own land know that the old saying “only two things in life are certain, death and taxes” is 100% true.

Sure enough, year after year, we receive a tax assessment from the county (or parish if you own Louisiana land) for property taxes that are due on a specific date, come hell or high water.

When times are good, we pay these taxes on or before the due date and try to forget about it as fast as possible. If you have a mortgage, chances are you don’t even realize when these taxes are paid as your escrow company will collect installments of the taxes and pay them on your behalf.

However, sometimes times aren’t so good, and we can’t pull together the money to pay annual property taxes. Sometimes we end up inheriting land that we could pay taxes for, but we just don’t feel the land is worth enough to pay its taxes.

This article will explain why property taxes are so important to the county, what happens to your land once you decide to stop paying property taxes, and how to avoid losing your land to a tax sale investor by selling your land fast.

What are Property Taxes Used for Anyways?

In order to understand what happens to tax delinquent land, it’s important to know what property taxes are used for and why they’re so important. In a nutshell, property taxes fund all of the county level services we receive including police, fire department, schools, public roads, and much more.

Since these programs are essential to keeping the local community up and running, it’s understandable that the county (or parish for Louisiana land) will levy penalties, fines, and even foreclosure in order to recoup the taxes owed to them.

What Happens if I Owe Back Property Taxes?

The answer to this question depends on the state and county where your land is located. The type of tax sale that’s held is determined at a state level, and can either be a Tax Deed sale, Redeemable Tax Deed sale, or Tax Lien sale…more on this later (note: a few states allow the county to determine what type of sale they will hold, this is rare).

In general, once you owe back taxes on your land, the tax delinquency process looks something like this:

  1. Taxes go unpaid.
  2. Land is put on a tax delinquent list and penalties start to accrue on the taxes owed (usually a percentage of the taxes owed).
  3. After a certain period of time (depending on your state and county), your land is scheduled to be sold at a tax sale
  4. If your state is a Tax Deed state, you will lose your land once it is sold at the Tax Deed Sale. You will not receive any money from the sale.
  5. If your state is a Tax Lien or Redeemable Tax Deed state, once your land is sold at tax sale, additional fees and penalties accrue on the back taxes.
  6. After your property is sold at a Tax Lien or Redeemable Tax Deed sale, you have a set period of time (redemption period) to redeem your property by paying all back property taxes, fees, and penalties.
  7. If the redemption period expires, the purchaser of the tax sale certificate has the right to foreclose on your land.

This means that they will own your property free and clear and you will be paid nothing for it.

This is the worst possible scenario as you lose your property without any compensation.

It is extremely important to know the following dates for your county:
  1. When are property taxes due?
  2. When does land go delinquent if taxes are not paid?
  3. What is the date of the county tax sale?
  4. By what date you must redeem your property to avoid losing it?

What are Tax Deeds and Tax Liens?

Tax sales may be one of three types: Tax Deed, Redeemable Tax Deed, or Tax Lien. The type of tax sale your land with back taxes would go through is determined by the state and county in which your land is located. To find out what the exact delinquent tax process is in your county, call the county treasurer or tax collector and ask about the tax sale process and timelines.

Tax Deeds:

In Tax Deed states, ownership of the tax delinquent land itself is sold during the Tax Deed sale. When a Tax Deed is issued by the county following a Tax Deed sale and the investor that purchases the Tax Deed is purchasing the ownership of that property.

If you don’t intend to pay your property taxes in Tax Deed states, you need to sell land fast, before the Tax Deed sale, in order to avoid losing your land.

Redeemable Tax Deeds:

Redeemable Tax Deeds work almost identically to Tax Deeds, with the exception that the property owner has the right to redeem their property during the redemption period by paying off all taxes, penalties, and fines.

In order to avoid losing your land to a Redeemable Tax Deed sale, you would need to sell your land prior to the expiration of the redemption period.

Caution: Don’t wait too long to sell your land, as back taxes and penalties accrue quickly and could add up to more than the property value itself.

Tax Liens:

In contrast to a Tax Deed where the property’s ownership is being sold, a Tax Lien places a lien on the property which must be paid off during the redemption period or the purchaser can foreclose on the property. After a Tax Lien is issued by the county, the original property owner retains ownership of the property as well as the maintenance and need to pay future taxes that go along with property ownership.

For these properties, the owners of tax delinquent land can still redeem their property by paying all taxes, fees, and penalties after it is sold at tax sale but before the redemption period expires.

Similar to Redeemable Tax Deeds, penalties and fines can add up VERY fast on Tax Liens, so make sure to consider the cost of letting your property go to tax sale if you plan to redeem it.

Here is an example of how the Mississippi back property tax process would look:

In 2014, Mr. Joe Smith Jr. inherits 100 acres of land in Pike County Mississippi from his father, Joe Smith Sr. Joe Smith Jr. has moved away from Pike County Mississippi years ago and is living in Dane County Wisconsin. Since he hasn’t seen his father’s land in 15 years and because he is so busy in Dane County Wisconsin, Joe Smith Jr. decides not to pay the $500 of property taxes that are due in January 2014.

Pike County Mississippi property taxes become delinquent if not paid in February, and they begin earning a 1% penalty per month. By August 2015, Joe Smith Jr.’s 100 acres have been sitting long enough to be listed and sold at tax sale.

After the Pike County, MS tax sale, Joe Smith Jr. has a two year redemption period in which to pay off all Mississippi back taxes, penalties, and fees. If after two years Joe Smith Jr. still hasn’t paid off the back taxes, penalties, and fees, the redemption period will close and the purchaser of the Tax Lien has the right to foreclose on the 100 acres and own the property free and clear….

…end of story. Joe Smith Jr. loses his Mississippi land to a tax sale investor without receiving a cent of compensation.

What you Can do to Avoid Losing Your Land to Back Taxes:

This story could have had a completely different ending: Joe sitting in Dane County Wisconsin, with a check in his hand after spending 10 minutes filling out an online form and a couple quick signatures. Had Joe Smith Jr. found Hinterland Properties at any point during the tax delinquency process, this would have been the outcome, and his real estate problems would have been out of his life in less than 30 days.

The moral of this article and the example above is this: don’t let a tax sale investor take your land or property away from you and leave you with nothing. If you have unwanted land, sell your land before you lose it for good. If you want it out of your life now, request an offer from Hinterland Properties and we will make the transaction fast, easy, and it won’t cost you a penny.