Tax Lien Help
This blog is focused on real estate investing. I have written a lot about tax liens and the tax sale process from an investor’s point of view, however I have gotten several questions from homeowners and tenants that are wondering what they should do. So here is the tax sale process from a homeowner and tenant’s point of view.
First, don’t panic
If your property goes to tax auction, don’t panic. Depending on your state they may auction off a tax lien or a tax deed. In either case, there are usually options to save your house.
Tax Liens
In tax lien states you still own the property. The auction is only for a lien against your property. The winner of the auction receives a tax sale certificate, which basically makes them the tax collector. They take over the position of the city or county and get to collect the taxes and interest.
Tax Deeds
In the states that auction off tax deeds, the winner of the property actually gets a deed to your property. You are no longer the owner. However most states that sell tax deeds offer a right of redemption, so that you can get your property back by paying the back taxes, penalties and interest. This is most often for six months but in some cases a year.
Next don’t delay
While you do not need to panic, if you delay in taking care of the taxes, interest and fees can add up to substantially more than the original tax bill. Some states charge as high as 25%. Ultimately you could lose your home.
What are the risk and costs to homeowners in Tax sale?
The rest of this post is about the rules in Maryland, but the basic concepts will apply in many areas. The interest rate is for Baltimore City and that varies by county in Maryland. If you want to “redeem” or pay off you tax lien you must do the following:
- You must pay the lien amount
- You have to pay interest on the late taxes at 18%
- You must catch up any taxes that have come due since the tax sale date.
- After four months $750 in legal fees can be added
- After six months foreclosure can start. Legal fees and miscellaneous expenses can be over $2000 if foreclosure is started
- Ultimately the tax certificate holder can take your property through the foreclosure process.
The tax certificate holder can take over your property but must file for foreclosure in order to do so. They cannot even start the foreclosure process until after at least six months. (unless your property is listed as vacant and needing substantial repairs by the city, then they can start after two months)
How do I Save my Home?
Contact the county tax sale office, or in Baltimore city go down to the Abel Wolman Municipal Building, 200 Holiday St., Baltimore, Maryland 21202. Ask for the tax sale office. It’s on the first floor. The office is open from 8:30am – 4:30pm. They will give you a payoff amount and it will have to be paid in cash or certified funds.
Anyone who has an interest in the property may redeem the tax lien. So often a bank will pay off the taxes to protect their interest. However in this case you will then owe the bank the taxes.
Water bills are part of the taxes that are owed the city or county. Baltimore City offers two programs to help, the Low Income Water Assistance Program and Senior Citizen Water Discount Program. I have been told that the city will work with people who need tax lien help and are struggling to pay their property taxes however I have not found contact information yet.
What Are My Rights
You still own the property. You still get to live there and do anything you would do with a property you own. You can choose to sell or rent it. If you choose to sell, the taxes will be paid out of the money you get for the property. You have the right to redeem (pay the taxes) the property right up to the day the judge orders the foreclosure final.
Foreclosure is a long process, typically at least 4-6 months but it can take years. Everyone who has an interest in the property, owners, heirs (in the case of a deceased owner), banks, etc., will be notified by certified mail and the sheriff will post a notice on your door. Avoiding the certified mail may not stop the foreclosure, but it will keep you in the dark about what is happening.
You cannot lose your home without a foreclosure. You should get a notice mailed to you 60 days before a foreclosure is filed. Paying now will save you the cost of the foreclosure. Once a foreclosure starts the legal fees will add up quickly.
How Long Do I Have to Redeem my Property
You have the right to redeem (pay the taxes) up until the day a judge rules that the property now belongs to the tax certificate holder. Tax sale foreclosures do not end on a specific day. The case file sits on a judges desk in a pile. You don’t know when it will reach the top of his pile and become final. Sixty days after you get notice the case file can be sent to the judge and at any time you could lose your home so it is important to act when you get notice.
Upon request the tax lien holder must give you a redemption statement and cannot stop you from redeeming. If the tax certificate holder does not allow you to redeem you can go to the court and ask the court to set the amount of redemption. The legal fees are capped at $750, after 4 months but before the foreclosure is filed. After the foreclosure is filed the fees are capped at $1300 but other expenses can add up to over $2000. You should get an itemized statement listing all the fees separately.
The time line goes like this:
- After four months $750 in legal fees are added
- You will get a notice 60 days before a foreclosure is filed
- Foreclosure can start anytime between 6 months and two years.*
- You will get a notice after the foreclosure is filed that will give you 60 days to contact the court. The foreclosure cannot be final before this 60 days is up.
- After all notices have been sent, 60 day period has passed, and other terms complied with, the file will be sent to a judge.
- The judge could take days or months to issue a final decree stating that the foreclosure is final. You have until that time to pay your taxes and save you home.
* In Baltimore City, the foreclosure on properties that are listed as vacant and in need of substantial repairs can start after 2 months
What if my landlord is in tax sale?
Most properties that are in the newspaper listing for the tax sale are paid off before the sale. Even if the property goes into the sale, you still have the right to stay there. Your lease is still valid until a foreclosure is final and that could be year or more later. However IF there is a foreclosure and it is final, the new owner does not have to honor your lease. You will be notified of the tax foreclosure, at least by a sheriff posting on the door. From the time of this notice it will likely be at least 4-6 months before the home is lost.
To protect your interest you can pay the taxes. I would go down to rent court and see if legal aid could help you in this situation. I suspect that you could have the court hold your rent in rent escrow until the landlord paid or let you pay the taxes apply it to the rent.
What if I lose my home?
If the worst comes to pass and the tax sale foreclosure becomes final, the tax certificate holder has to pay you for the house based on his or her bid at the auction. This money will first go to pay any mortgages or other debt attached to the property and you will get any money left over. It might be a small consolation but you may actually get a payout for selling your home.
Disclaimer: I am not an attorney and the above is not intended as legal advice. The above is simply my laypersons understanding of Maryland law. Tax sale laws vary by state. The above may be totally inappropriate for states that sell tax deeds.
Good luck,
Ned
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27 responses so far ↓
1 The 38th Bankruptcy & Debt Carnival- Online Now. // May 25, 2009 at 8:51 am
[…] Carey presents Help! My Home is going to tax sale. posted at Baltimore Real Estate Investing Blog, saying, “Help for home owners going into tax […]
2 Sire (53 comments.) // Jun 12, 2009 at 7:55 pm
Man, again I’m not sure if this happens in Australia. I have heard of some cases where a bank sells off a loan to a debt collector and the debt collector, after trying to recoup the debt over a period of time, sold off the home for way under the market value.
I reckon it just goes to show you should keep up with your debts, tax or otherwise.
Sire´s last blog post..Making Money With Snap Dollars
3 My Life Thinking (1 comments.) // Jun 13, 2009 at 3:55 am
Very informative post, I like your blog!
My Life Thinking´s last blog post..After Infected by H1N1 .. Mexicans Came Back from Death – Human Errors
4 Lacette (1 comments.) // Jun 15, 2009 at 5:18 am
It’s really not good to joke to have your home sequestered because you have problems with your taxes. Real estate taxes are pretty high these times, not to mention the decline of real estate values and the rising prices. It’s really tough to maintain a house, but what can we do? We have to do something to make ends me, if we want to continue having a roof on our heads/
5 Ned // Jun 15, 2009 at 11:22 pm
Thank you for stopping by and thanks for the compliment.
6 Charles in Las Vegas (5 comments.) // Jul 23, 2009 at 10:35 pm
Taxes here in Las Vegas are pretty high, although the county has stated that they are reassessing since home prices have dropped so much. Are you seeing the same thing there in Baltimore?
7 Baltimore Homes (1 comments.) // Aug 25, 2009 at 2:20 pm
In Baltimore only about 6% of the homes that are sold to tax sale purchasers actually go into default. Most of the buyers are law firms. You may ask why are these law firms buying all the tax leins. The answer is simply for the legal fees they can charge to owners when they attempt to redeem thait tax lein. In Maryland, the owner can obtain legal council and charge “resonable legal fees” usually about 1,200 dollar per case. Talk about buying business!
8 Ned // Sep 5, 2009 at 11:36 pm
Nick,
You are absolutely right. Many attorneys bid at the auction and that is a big part of what makes it so competitive.
Thanks for stopping by. – Ned
9 Ned // Sep 6, 2009 at 12:00 am
Taxes here are reassessed once every three years so many will be stuck with high taxes for some time here.
10 jason (1 comments.) // Oct 25, 2009 at 10:09 am
great article – taxes skyrocketed in our area in 2008 because properties were re-assessed. But now property taxes have droped by about 50%. But that is a common question we are having homeowners ask up
11 Ned // Oct 26, 2009 at 10:04 pm
Thanks for reading Jason. – Ned
12 Mitch (2 comments.) // Nov 4, 2009 at 11:05 am
Nicely written and researched, Ned. Good to see these questions answered like this, all in one place. I’ve always wondered about this myself, especially when you see them listed in the newspaper, and often for less than $50.
.-= Mitch´s last blog ..Jobs; Are They Coming Or Going? =-.
13 Ned // Nov 4, 2009 at 6:56 pm
Thank you for the compliment Mitch. I am surprised you’ve seen them for $50. Maryland just raised the minimum ain back taxes that would go to auction to $500. My attorney says he has gotten a property for an unpaid water bill of $160!
14 247 mortgage (1 comments.) // Mar 2, 2010 at 11:16 am
that’s quite scary that they could auction off tax deeds to your home, especially if you have paid a lot of money into your mortgage then get into trouble and end up with nothing. Before getting to this mess its best to admit if you are start to struggle with payments and go see an advisor who can help you with your payments and get you onto a good financial sense.
15 Ned // Mar 2, 2010 at 3:16 pm
Good advice, Sadly many people bury their heads in the sand when they get into financial trouble.
16 Crystal // Mar 25, 2010 at 5:57 pm
Ned,
Where EXACTLY can I go online to determine if my property is included in the Tax Sale???
17 Ned // Mar 25, 2010 at 8:25 pm
Crystal,
Go to https://www.bidbaltimore.com/
You will have to register to see the list. I can see it because I have registered in years past but you may have to pay $100 to register. If you send me the address via the “Contact Us” page on my site I will look it up for you.
18 Ahmed Payette (1 comments.) // Apr 18, 2010 at 10:28 pm
It looks like the rules are basically the same no matter what jusrisdiction you go to. I thought in the tax lien/foreclosure laws a homeowner would have more rights.
.-= Ahmed Payette´s last blog ..Montgomery County PA Sheriffs Auctions =-.
19 sherry morris // Jul 7, 2010 at 10:06 pm
I just got a letter that if I didnt pay so much by the 30th of June my house could go up for tax sale I wont have it until the 1st of August will that be too late the treasurers office wont give me any answers I havent been able to sleep and am very worried about this please help I live in Indiana
20 FRABJ // Apr 16, 2011 at 6:46 pm
ISN’T IT A CONFLICT OF INTEREST THAT THE LEGISLATORS (MOSTLY LEGAL TYPES) MAKE THE TAX SALE LAWS SO THAT THEY CAN BUY TAX LIENS, FORCING THE POOR SLOBS THEY SUPPOSEDLY REPRESENT TO PAY THEM THE LEGISLATORS/LAWYERS TO PAY THROUGH THE NOSE TO REGAIN THEIR HARD EARNED HOMES. WHERE IS THE FAIRNESS OR OVERSIGHT IN THAT?
ALSO WITH ALL THE LAWYER (SCAVANGERS) BUYING THE TAX LIENS, PRICES ARE DRIVEN UP TO THE PLEASURE OF THE GOVERNMENT (WHO AGAIN ARE SUPPOSED TO BE REPRESENTING US – THE POOR SLOBS) AND PREVENTING OR MAKING IT DIFFICULT FOR ANY OF US WHO WANT TO BOOTSTRAP THEMSELVES OUT OF THE GETTO FROM BUYING A PROPERTY ON THE CHEAP. THIS ISN’T THE AMERICAN WAY AND IF I HAD THE MONEY I WOULD CHALLENGE THE SYSTEM IN COURT. SOME DAY SOMEONE WILL AND I WILL BE LAUGHING, BUT OF COURSE IT WILL BE TOO LATE FOR US POOR SLOBS.
I’M MAD AS HELL AND AM NOT GOING TO TAKE IT ANY MORE. WHETHER ITS TEA PARTY OR ANY PARTY, AT LEAST THEY ARE LISTENING. THE REPUCRATS ARE ONE OF A KIND, THEY WRITE THE LAWS FOR THEIR OWN BENEFIT, NOT OURS. SORRY TO RUIN YOUR DAY FELLOW SLOBS, BUT THEN YOU ALREADY KNEW IT, BUT WERE AFRAID TO DO SOMETHING ABOUT IT.
21 Ned // Apr 19, 2011 at 12:02 am
Frabj, I don’t know how to reply,you pretty much covered it all.
22 Olga // Sep 24, 2011 at 4:40 pm
Someone came to my home and notified me that it was no longer mine. I owed a few thousand, I really mean a FEW thousand dollars in back taxes and was catching up. I even made payment arragements with the lawyer who was collecting for the township. Too late! The house was sold. I am legally blind, single mother with 2 kids. No where to go. No home after 23 years and working 10-12 hours 5 days a week. Made no difference. In the US you own nothing. NOTHING. It’s all a scam. You have no legal rights of ownership. My father was raised in the Soviet Union. He came here when he was 26 years old. The first thing he learned was English. The next thing he learned is that this country was far from free.
23 GIJOE // Sep 28, 2011 at 8:51 am
I just purchased a house at Tax Sale in PA and now I am feeling really bad about it. What I didn’t realize is, that there was still someone living in the house. An now I feel as if I stole the house from under them. Should I feel this way?
24 Ned // Sep 30, 2011 at 9:33 pm
GI Joe, Fortunately I have never taken a house with someone living in it. I would probably feel bad myself. However neither you nor I should feel bad. The person that loses a house to tax sale is only suffering the consequences of their own choices and actions. There is nothing stopping you from selling the property back to the homeowner, for a profit or for what you would have been owed if they redeemed it on time. you could even finance it with easy terms.
One thing I have considered is offering the previous owner a “Life Estate”, meaning they own it until they die and then it reverts to me.
25 Ned // Sep 30, 2011 at 9:34 pm
Olga,
I am so sorry to hear of your bad fortune. It sounds as if you may have a case if you can find a lawyer to handle it. Good luck. – Ned
26 Gia // Aug 9, 2017 at 2:34 pm
I got to laugh at the comment their actions their choices. You have no idea how hard some people have it. Do you honestly think it’s all about bad choices and decisions. So many things are out of people’s control like the economy, and job losses are often the result. Are there people who live above their means? Yes, in those situations I couldn’t agree more but what about simple people in modest homes that don’t have much but put everything into their houses , because they need shelter,
Do you think the tent cities that cropped up all over the USA were due to just bad decisions or maybe bad decisions by the government that is running our country into the ground. You heard what Olga said she is blind and has two kids and she’s right the government never let’s you own anything always have their hands out waiting to swoop in and take away everything you work for. I consider people who buy other people’s sorrows for profit to be vultures.
Instead of finding ways to help your fellow human being you will prey on them instead. God help you. This country does not truly care for it’s people, while politicians are linning their pockets with the hard earned money of working poor. Giving themselves expensive toys and raises and just enjoying the fruits of others labor. That money is coming from our tax dollars . God forbid you can’t pay it’s tossed to the street and now your helpless homeless eating from a garbage can . That is if you don’t get arrested for loitering or being homeless.
Trust me nobody cares and the people who buy tax liens your feeding into it.
27 Ned // Aug 21, 2017 at 1:20 am
I am glad you got that off your chest.
Now lets talk in a rational fashion. You seem to ignore that the entire post is about how to help people in the situations you describe.
You make an assumption that I have no idea of how hard people have it. Yet you have no idea of the struggles I have had. I have twice faced foreclosure and once came very close to bankruptcy. At one point I ate basically Oodles of Noodles and Bean Burritos. I could buy a bag of beans for a dollar and make myself enough burritos to eat for 3 days.
Yes I did note that Olga was blind. I also noted her bitter attitude which is probably holding her back form being as happy and self fulfilled as she could be.
Did you notice that I wished her well and mentioned she may have a case against whoever took her home.
Yes I am a vulture but not a shark. Sharks kill in order to eat. A Vulture never kills anything. A Vulture simply cleans up the rotting mess no one else want to touch.
I am proud that in my small way I am helping to clean up the rotting mess that we call blight in Baltimore.
Now I agree with you in the short term your life is subject to the random problems that come at you. however long run it is your own choices, actions and habits of thought that land you where you are today.
Cutting class to hang out with your friends at the corner is a choice. So is going to the library after school. Smoking cigarettes is a choice. Eating a salad instead of a hamburger and fries is a choice. Which of those choices do you think long term leads to positive results. – Ned