Unpaid Real Estate Taxes

“When you’re a buyer, you want to make sure that the seller has paid all outstanding real estate taxes,” says Gina Giannelli, associate regional counsel at Chicago Title Insurance 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 company or closing agent 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 agency 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 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 interest, 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 mortgage 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 equity you might have established as well, for a very small dollar amount, because generally real estate taxes aren’t that much money,” warns Giannelli.

For more stories on consumer safety, real estate and personal finance visit ThinkGlink.com.

August 5, 2008


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