Best Options When Dealing With Property Delinquency Tax

If you happen to be delinquent on your property tax payments for more than a year, the standard penalties will be supplemented by an administrative fee (in case you want to start making payments as part of a plan to pay off a debt) as well as a redemption fee.

Chances are, if the property taxes have not been paid for three years, the county will move to foreclose on your property in order to get the owed, delinquent taxes. Property tax foreclosure is announced by a notice which will be sent via mail, posted on the door or delivered personally.

The notice will clarify if your property is "subject to foreclosure", "in foreclosure", or is marked as to be "sold at auction" anytime in the near future.

Earlier, it was recommended to speak with a tax collector or financial advisor to determine what steps are available to resolve your debt. We will begin exploring some of those steps now. 

Apply for Loans, Property Tax Deferral and Applying for Bankruptcy

1. Contract a High-Interest Loan from a Private Lender.

Contracting a high-interest loan from a private lender is one of the options that can get a house owner out of the tax delinquency mess and stop the property foreclosure process.

In many states, these loans are considered one of the main reasons why many families are still able to hold on to their homes. The private lender who offers the loan will then pay the delinquent bills and assume the corresponding lien ownership.

The homeowner then pays that loan back based on a predefined installment plan which both the owner and the lender have previously agreed upon. Usually, per regulations put in place, these types of loans are structured with a minimum of 12 month of duration, but can interest rates as high as 18 percent. 

The lien and tax delinquency loans are a multimillion dollar industry in every state across the country. Such loans constitute a very extensive and profitable business for the banks that issue them, a business that often comes at the expense of the debtor as they quickly find themselves unable to keep up with the high interest rates.

2. Refinance Your Loan

Refinancing your loan is another option you might consider. Contact your bank as well as other lenders while you are shopping for a more convenient interest rate loan. However, if you intend to pursue the road of refinancing a home mortgage that has one or multiple liens on it, you might be surprised to find that this aspect represents a major roadblock for you.

In this case, in order to obtain a refinance, accurate documentation of all the liens on the property (mortgages, IRS, even repair liens). You might even need to contact the IRS and get them to agree to accept and sign off on the fact that the refinancing lien takes precedence over the lien from taxation.

In case you are opting for a ‘cash out’ loan, you might convince the IRS to sign off on it by agreeing to pay out all delinquent taxes and penalties by and through the obtained loan difference. Be careful though. Refinancing (even at a lower interest rate) ultimately often means decreasing your equity, raising your overall debt and thus the amount of money you owe.

Property taxes are annual taxes, not a once in a lifetime thing to deal with. If you are not sure that your financial situation will allow you to make all future payments in due time, refinancing might not be the right choice for you.

3. Apply for a Rescue Loan

Another credit option to access in order to clear the tax delinquency on your property is a rescue loan. A great aspect of this type of loan is the fact that its interest is anywhere between 0 and 2 percent. However, applying and being accepted for a rescue loan is not an easy process.

There are several criteria, rules and guidelines which a homeowner needs to meet in order to become eligible for a rescue loan. The first criteria for eligibility is that the rescue loan can only be granted in the maximum amount of $30,000.

Another criteria of eligibility is to attend housing counseling. In order to find out if he or she is eligible and how to go through the process of obtaining a rescue loan, the owner must be in close and continuous communication with an agency certified by the department of Housing and Urban Development (HUD).

Even though it is highly regulated and requires multiple conditions and guidelines being met in order to be granted and take effect, the rescue loan is a feasible option to use in order to pay delinquency property taxes and stop the foreclosure process on your property.

Unfortunately, a high-interest, high-risk loan is usually the only type of loan an owner with delinquency tax payments and bad credit can access. Before deciding on accessing a high-interest loan, make sure you talk to a financial expert and confirm that you can indeed afford it in the long run.

Things to remember when assessing a loan designed to pay off your property tax bills:

·               Be very knowledgeable about the interest perceived by the credit loan you are applying for. Some creditors have as much as 18 percent interest rate!

·               Always check the interest rate on your property taxes.


If you don't have good credit, a fact which will be reflected in very high loan interest rates, it may be preferable to pay 5 percent interest on your property taxes, versus a higher interest rate charged on a loan.

·               Consider the additional cost of any penalties or other fees that could be charged to you. 


For example, in California, if you do not pay your property taxes by the due date (deadline- December 10th), a 10 percent delinquency penalty is assessed right away.

Sticking with the example of California, if the bill isn't paid by April 10th, an additional 10 percent penalty is assessed. After July 1st, you will be charged 18 percent interest (as the state of California does not hold tax certificate auctions).


In addition, you may also have to pay other fees and penalties.

·               Make a calculation of all the extra fees you will be charged with. The tax collector may charge a fee on the tax certificate auction.


They may also charge a redemption fee. In the long run, all these fees may be more expensive than paying a higher interest rate.

While seeming like a fast, easy solution in a time of crisis, contracting a loan to pay out the delinquent taxes on your property is not always the best thing to do.

While appealing in the short run, high-interest tax delinquency loans usually only end up increasing the overall debt of the owner and placing even more stress on their financial situation.

When in a precarious, delicate financial situation, every owner should consider very carefully their options before deciding on contracting another loan and further increasing their debt.

4. Apply for a Property Tax Deferral

One other option to consider is applying for a property tax deferral in the attempt to reduce the delinquent owed taxes and stop the foreclosure process on your property. However, this program has multiple eligibility criteria which an owner must comply with.

The criteria which the owner must meet in order to successfully apply for a property tax deferral include:

·         age criteria - this deferral is mostly aimed for senior owners


·         income criteria - aimed at people with low and medium registered disposable income


·         residency criteria - the house must be registered as being your primary residence at the time of application


·         equity criteria - you must either own your house entirely or hold a considerable equity on it in order to qualify for property tax deferral.

5. File for Bankruptcy

Another possible but highly unpleasant way of stopping the delinquent tax payment foreclosure process on your property is by filing for bankruptcy. Filing for bankruptcy will pause or stop the foreclosing process on your property.

It might also give you the possibility of paying all your delinquent property taxes in installments, over the course of the following years. However, filing for bankruptcy is a highly bureaucratic and complicated process, which will most likely require that you hire and employ the services of a specialized attorney.

One important thing to keep in mind is that any property owner has the right to pay all accumulated and pending delinquent taxes, interests, costs, penalties and other accumulated fees at any time up to the day which was scheduled for the sale.

The owner will then be issued a lien in the amount paid for the delinquent taxes.

While property tax delinquency can lead to property tax foreclosure on the property, it is not a final sentence. Remember, the county has an obligation to notify you in writing when the foreclosure action is started on your property.

Also, foreclosing on a property requires a court hearing to be held on the matter. The court will need to give you a thirty-day notice of this hearing. In the notice, the date, time, and place of the hearing will always be clearly specified.

This thirty days’ notice is the best time to call your bank and financial advisor and evaluate your situation in order to determine the best course of action. Your bank, attorney, and financial expert are probably your best chances of advantageously handling the foreclosure situation. During the time of the hearing is the best moment to tell the judge what you have worked out with your bank and/or agent and why the foreclosure on your property should be stopped or delayed.

Selling the House to an Investor

The real estate market has changed quite a bit over the last several years. It is quite common for people to receive offers for their houses from real estate investors.

Many real estate investors buy properties which they later intend to either use as rentals, resell at a higher price or because they want to build up a property portfolio. Chances are, you know exactly what we are referring to after having seen signs saying “we buy homes fast”.

You might have even received one or more offers from investors on your own property sale. So the question is, should you consider actually selling your home to an investor if you are pressured by your financial situation into making a fast sell, or is it just not worth it?

There are many things to be said about selling to real estate agents, as this subject has been highly debated and widely considered controversial. Let’s review the pros and cons of selling your house to an investor.

The possible benefits of selling your property to a real estate investor

·               It usually implies a fast sale (which can go as fast as seven days to closure)

·               It can include flexible payment options. A professional real estate investor might give the owner the possibility of choosing cash offers, certified funds, or even go as far as sign off and take over the mortgage completely.

·               The investor might offer to buy the house without even visiting or inspecting the property. That can spare the owner significant costs in repairs.

The downsides of selling to a real estate investor:

·         In such sales, statistics say that homeowners usually tend to sell their homes well below their current market value, thus losing a considerable amount of hard earned equity and money.

Remember, most real estate investors are interested in underpriced homes located in great renting areas. This is a business for them.


While they need to earn profit out of it, you should also try and make sure that you are not being taken advantage of.

·         Real estate investors are not obliged to have a license to buy. The buyer’s agent is also not obliged to tell you who exactly is investing in the property.

That means you have little to no information about who is actually offering to buy your home.

This is and should be a real cause of concern to most buyers, as many private buyers might be interested in a short sale only in order to re-sell the property again for a much higher price.


Be very careful when deciding to sell to a real estate investor and the final price you are willing to sell your property for.

·         There is a real possibility of being scammed by impostors posing as serious real estate investors.


There is always a risk of fraud. However, when dealing with transactions involving our biggest investment, we should always try to minimize the risks as much as possible.

One way to do that is by asking for extensive references and doing online research on the real estate investor making the offer.

In order to minimize the risks of making a bad transaction with a real estate investor, it is always a good idea to try and work closely with your selling agent. He or she can try and do some extra research on the possible buyer as well as help you estimate the correct market value of the house.

Try to Work Out a Payment Plan.

Delinquent property taxes can be a very complex and difficult issue to solve, especially when the owner is faced with a challenging, delicate financial situation. Property taxes are quite high and usually, take a considerable bite out of a person’s yearly income.

Here are some steps to consider and tips to follow when trying to set up a payment plan for property taxes:

·               Contact the city or the county collector’s office.


Based on the block and lot of your property, the treasurer will help you determine exactly what you owe in taxes, penalties, and other costs.


Consider that each state has their individual deadlines and penalty fee structure.

·               Work with the government representative to set up an individual payment plan.


This might require a consistent down payment from your part.

·               Investigate the published county list of delinquencies.


Verifying this and contacting the appropriate authorities regarding the matter might save you from the burden of a tax lien and even afford you the possibility of avoiding your home being sold off at an auction.

·               Show good faith by making payments.


·               Most governments require owners to make annual payments, plus the interest accumulated from the delinquent tax.

If you default on the plan, the government will most probably foreclose the property and auction it off in order to recover the owed sums.

Whereas a payment plan might be a great idea for people who are having difficulty paying off their current property taxes, the same thing might not apply to those who have fallen behind on taxes and have a considerable amount gathered in delinquency taxes, fees, penalties and costs. Before deciding if a payment plan is the way to go, make sure you understand what the entire owed sum amounts to, as well as how interest will continue to pile up.

It is important to understand whether or not you will be able to truly afford making the payments as required.

Auction the Home

Auctioning homes is steadily becoming more and more popular around the country, especially for those who are pressed by financial or personal matters to let go of the house and close out a fast deal. People are tempted to auction their homes in the hope of obtaining a fast sale at a reasonable price (close to the market value of the property).

The timelines of the auction usually vary. However, auctioneers usually need around forty days to effectively promote the house prior to the auction. The final settlement might be signed anywhere in the following forty days.

One thing worth considering is the fact that the most favored homes in an auction are homes holding a considerable amount of equity which is lost as most homes up for auction generally sell far below market value.

Homeowners usually tend to regard auctions in a favorable light because they do not require the owner to do expensive home inspections or costly repairs. People are also happy because the process enables to set the starting price of the auction, as well as the lowest price which they are willing to accept.

They are repeatedly told by the auctioneer that all bids will be accepted or denied by the owner himself or herself. However, auctioneers often recommend owners to set a 10 to 15 percent reserve below the market value of the property, meaning that the owner will very likely lose a considerable amount of equity upon the sale.

And that is not the entire cost of the auction. In addition to that 10 to 15 percent equity loss, the owner must also pay the auctioneer’s commission, which usually ranges between 1.5 and 4 percent of the property’s final selling price.

The homeowner must also dig deep into his pockets to pay for the promotion of the house, which usually amounts to around $1000.

Taking all these aspects into consideration, we can conclude that while auctioning is a really fast way to save a house, it is often an expensive option to take, one that might end up costing the owner dearly in hard-earned equity.

As a homeowner, make sure you evaluate all the costs and benefits of this method carefully before deciding to auction your home.

Opting for a Short Sale

Short sales are usually a direct result of financial difficulties which make the owner unable to continue to make the required payments in order to keep the house.

A short sale usually happens following a negotiation between the lender and the owner, at the end of which, the bank allows the homeowner to sell the house for less than the remaining loan balance (with the agreement to cancel the remaining loan balance difference).

An important detail is that the loan/debt cancelation needs to be declared by the owner as ordinary income and might be subjected to tax.

Tax filing options like TurboTax can help you identify if your canceled debt is subject to exclusions or not. Over the last several years, banks have begun to look more favorably on short sales.

If you have considered opting for a short sale on your property, you should make sure you have calculated what your capital gains will be as money left over is subject to tax. 

Depending on the situation, you may even have to declare extra income for tax purposes. You may even have to declare some extra income if your mortgager modifies the outstanding mortgage balance. It is a common fact that most people choose not to pay their property taxes when deciding to opt for the short sale.

That happens because every dollar which the owner spends on the sale, she or he will most definitely not get back. It is also because, most of the time, the lender is willing to cover the overdue taxes for the sale to go through. However, property tax delinquency that has already led to a tax lien being placed on the property is a different matter.

Another thing definitely worth considering before opting for a short sale is the fact that short sales are highly sensitive to liens that have been placed on the property, due to how much these liens actually complicate the selling process.

It is common knowledge that buyers avoid properties with liens placed on them. One important thing to keep in mind is that, in order for the final sale to go through and close, the lien needs to be taken off and the property title cleared.

If, by any chance the owner manages to find a buyer who is willing to buy the property with the lien, the value of the lien is always reduced out of the outstanding, final selling price of the property, which means that you will probably feel the weight and burden of the entire sum.

While a short sale might seem like a tempting option to take, it is one of the most bureaucratic complicated solutions to take for those with delinquent property tax liens.

If you have a tax lien on the property and want to opt for a short sale make sure you contact a real estate agent who actually specializes in short sales, such as a Certified Distressed Property Expert (CDPE).

Due to the complexity brought about by the tax lien, it is highly recommended that you also contact a financial expert or a tax attorney.  The specialized agent and the attorney will walk you through all the details of your options and help you finalize the complicated aspects of a short sale involving a tax lien.

Relates To  -  home seller tips, property tax