Behind on Property Taxes? Here Are Your Options.

Conceptual image of property taxes dominating house

If you fail to pay your property taxes, you run the risk of losing your house. This is when the property becomes considered “tax-defaulted” land and can be sold by the county in order to collect the delinquent tax payments. Different states and counties will have their own property tax default rules.

California Tax Default Rules

In California, the property is deemed tax-defaulted as of 12:01 am on July 1 of any given year when property tax payments have not been made. If the property is tax-defaulted for at least five years, then the county has the right to sell it. They will notify you and give you every chance to pay your past-due taxes. If you fail to do so, then your house could be taken away from you and sold at a public auction.

Explore Your Options Before Losing Your Property

If you are behind on your property taxes or in any other form of financial distress where you are afraid of losing your house (mortgage default, pre-foreclosure, short sale, etc.), you may have options. You may be able to sell your house before the bank or the tax collectors force you out of your home. You will be giving up the property, but you might be saving a lot of stress while reducing the financial hit as much as possible. You may even come out ahead depending on your equity standing. Nobody wants to be in a state of financial hardship, but it happens and you have to do what you can to make the best of a bad situation.

This is why it is so important to explore all of your options when you are defaulting on your property taxes. You might be able to get financial assistance or qualify for a financial relief program that allows you to pay your back taxes over a specified period of time. You might be in position to take out a second mortgage or home equity line of credit (HELOC) if you have enough equity in the property.

Selling to a Real Estate Investor

Last but certainly not least, you can always consider the option to sell your house. You can take the time to get it ready and list it on the open market (whether through a Realtor® or on your own as a “For Sale By Owner” transaction). Or, you can talk with real estate investors who might be willing to buy your house for cash. At PropertyLark, we work with a lot of tax-defaulted property owners and a cash sale often makes the most sense. The transaction can be closed very quickly (taking weeks rather than months) and we buy the houses in as-is condition, meaning you don’t have to spend any extra time or money on repairs. You are able to get out from under your financial burden, pay off those back taxes and get whatever else you can out of the property.

Other Creative Financing Options

In addition to cash sales, you can also talk with real estate buyers about other creative financing options. You may be able to work out a lease option with a potential buyer, where you rent out the house for a specified lease term and the buyer has an option to purchase it. If you already own the property outright, you can possibly do an owner financing deal. This is where you are essentially the bank. You will collect interest-bearing payments from the buyer for a pre-set loan period until the property is fully paid off. There is also subject-to financing, where your existing mortgage loan stays in your name while the buyer takes over the title deed and makes the loan payments on your behalf. This can work in tax default situations when the contract has the buyer making any back tax payments as part of the agreement.

The point is that you may have more options than you think you do. Don’t let falling behind on property tax payments or mortgage payments cause you to lose everything. Sell your house or find financial help before someone else takes your property from you.

PropertyLark will help you look into all your home selling and leasing options. To get your cash offer or receive guidance on your selling options, contact us today.