||It has been suggested that Tax deed sale, Tax lien sale and Tax taking be merged into this article. (Discuss) Proposed since July 2010.|
|This article does not cite any references or sources. (January 2007)|
A tax sale refers to property (usually real property) being sold by a taxing authority or the court to recover delinquent taxes. Typically these are property taxes, but other entities like utilities sometimes hold the power to take property for unpaid debts. The taxing jurisdiction is usually the county (the parish in the case of Louisiana, or city. Townships are common in New England. Even school districts initiate tax sales in Texas.
When a taxpayer fails to make a payment, state law offers the city or county a method of collecting its tax without simply having to "ding" the nonpaying person or business. Two main methods are used by counties to capture delinquent real property tax: tax deed auctions/sales, or tax lien certificate sales/auctions. These types differ in what is being sold and how (if any) transfer of title or interest is handled.
In most places in the US, a tax sale lien takes first priority, eclipsing other liens.
In recent years the market in tax liens has been so reliable that a number of banks and hedge funds have invested large amounts of capital in it. Bank of American, Broad Capital, RMPAM, and Fortress Investments are among the big-money participants. Online auctions have also become part of the tax-sale picture.
Normally a period of time, varying from months to several years, is allowed after a property owner misses a tax payment. During this time an investor may pay the tax. To regain full control, the property owner will have to pay the investor's principal plus a certain, often high, interest, plus costs or fees. NPR reported on a woman losing her home in Baltimore in May, 2010, because she had missed a water payment of $360. Over time her obligation multiplied to over $3,000.