Tax sale

A tax sale is the forced sale of property (usually real estate) by a governmental entity for unpaid taxes by the property's owner.

The sale, depending on the jurisdiction, may be a tax deed sale (whereby the actual property is sold) or a tax lien sale (whereby a lien on the property is sold) Under the tax lien sale process, depending on the jurisdiction, after a specified period of time if the lien is not redeemed, the lienholder may seek legal action which will result in the lienholder either automatically obtaining the property, or forcing a future tax deed sale of the property and possibly obtaining the property as a result.

The governmental entity can be any level of government which can assess and collect property taxes or other governmental debt, such as counties (parishes, in the case of Louisiana), cities, townships (in New England and other jurisdictions), and school districts (in places where they are independent of other governmental jurisdictions, such as in Texas).

State law offers the governmental entity a method of collecting its tax without simply having to "ding" the nonpaying person or business, by (after a specified grace period, whereby the property owner can be charged interest and/or penalties as well as other costs) placing a lien on the property which, if not paid, will result in future costs, and ultimately the property being seized and sold. In most places in the US, a tax lien takes priority, eclipsing other liens such as mortgages.

The requirements to begin the foreclosure process (and to avoid it) must be strictly followed; otherwise, the property owner will lose all rights to the property (or the governmental entity will lose its right to collect the outstanding debt). Common requirements include:

Once the process begins, the property owner can still avoid foreclosure by paying the amount owed plus interest, penalties, and/or other costs or fees. The amounts can end up being quite high once the process is well under way. Even after foreclosure, in some jurisdictions the owner can still recover the property, by paying the amounts owed (plus additional interest/penalties/costs) within a specified time. Alternatively, the owner can file suit to have the sale set aside on grounds that the requirements were not followed (such as proper notice not given).

Two main methods are used to capture delinquent real property tax: the tax deed sale and the tax lien sale.

Both methods operate using an auction method. Traditionally, the auctions have been live events held at the county courthouse or another designated official location. However, online auctions have increased in usage.

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