“When you’re a buyer, you want to make sure that the seller has paid all outstanding real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. taxes,” says Gina Giannelli, associate regional counsel at Chicago TitleTitle refers to the ownershipOwnership is the absolute right to use, enjoy, and dispose of property. You own it! of a particular piece of property. InsuranceTitle Insurance is insurance that protects the lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. and the property owner against losses arising from undisclosed defects or problems with the title to property. Company.
In most cases, Giannelli says, a seller will bring evidence to a closing that all real estate taxes are current so the buyer can feel comfortable knowing he or she is not walking into a tax problem or a title companyA Title Company is the corporation or company that insures the status of title on real estate (called title insurance) at a closing, and may handle other aspects of the real estate closing. or closing agentAn Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state. will investigate the taxes for a property and know whether the real estate taxes are paid on that particular property.
The title commitment from the title insurance company will include information about the current status of real estate taxes for the property. It will tell you as a buyer whether a specific property has unpaid real estate taxes.
“If real estate taxes don’t get paid, as a homeowner, property owner, you do risk the chance of losing your property to a tax purchaser,” Giannelli says.
In defaulting on your real estate taxes, you take money away from the government; money the government uses for services and programs in your area. If you don’t pay your real estate taxes, the local municipality or applicable government agencyAgency is a term used to describe the relationship between a home seller and a real estate broker, or a home buyer and a real estate broker. conducts an annual auction in which the real estate taxes are “sold.”
At this sale, a tax purchaser bids for the property’s unpaid real estate taxes and that tax purchaser then pays your real estate taxes to the government. At the conclusion of the tax sale, the real estate tax purchaser has begun the process of becoming the possible owner of the property he or she paid the taxes on.
The rightful owner of the property generally gets a period of time to “redeem” the unpaid real estate taxes, but that process varies by locationLocation is where a property is geographically situated. "Location, location, location" is a broker's maxim that states that where the property is located is its most important feature, because you can change everything about a house, except its location..
Giannelli describes the process.
“The homeowner loses his property because they failed to pay the taxes, the taxes have been sold to a tax purchaser, the tax purchaser perfects his interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds., which starts a court proceeding, gives the homeowner all the chance, all the notices, all the abilities to pay those delinquent taxes, if the homeowner fails to do that, there comes a time when the tax purchaser is entitled to a deed to the property,” Giannelli says.
The tax purchaser must notify the property owner and all other affected parties, such as the mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. company or judgment holders. Once the tax purchaser notifies all those parties and if the owners still do not pay back the delinquent real estate taxes, the owners lose the property.
If that doesn’t seem fair, it’s because it’s not, but as Giannelli notes, “It isn’t a question of fair. The tax purchaser actually keeps the government from having a deficit. The money from the tax purchaser is used by the government to continue their necessary work, and it is the property owner’s responsibility to pay real estate taxes, and that’s one of your burdens of owning a tract of land.”
According to Giannelli, these delinquent real estate taxes are, unfortunately, leading to foreclosures all over the country. She sees unpaid real estate taxes most often with unemployed people, the elderly and residents of gentrifying neighborhoods.
“If you don’t pay your taxes, you’re going to lose your home and all the equityYour share of ownership in a company. Stockholders are often referred to as equity investors, because they invest in the equity of a company. you might have established as well, for a very small dollar amount, because generally real estate taxes aren’t that much money,” warns Giannelli.
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August 5, 2008