Penalties of Non-Payment of Property Tax

Tax collectors manage the tax accounts and watch for delinquencies.
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Property taxes are imposed on homeowners across the country. Failure to pay your property taxes on time can result in some rather harsh penalties ranging from late fees to foreclosure. It is in your best interest to remain current with your property taxes every year to avoid these penalties and the effort it takes to remedy the situation.

Property Taxes

Property taxes are assessed by counties, townships and cities. The taxes are used to fund various services such as public safety and schools. The amount of taxes you pay depends on where you live and the assessed value of your home. Taxes vary greatly across the country, ranging from a few hundred dollars a year to tens of thousands. However, real estate taxes are usually calculated with the same mathematical formula for all properties in a jurisdiction.

Penalties and Fees

Every taxing authority operates differently. Some places collect property taxes annually, while others do it bi-annually or quarterly. Regardless of when the tax is due, most places will charge some type of fee if you fail to pay your taxes by the due date. These can be a flat rate or a percentage of the taxes owed. The penalties may continue to rack up until the tax bill is paid. However, paying the bill in full should remedy the issue.

Tax Liens

Some states take the penalties beyond charging fees. According to, 29 states utilize tax lien sales to recoup the funds lost to delinquent tax payments. Tax lien sales offer investors the chance to purchase a lien certificate for the cost of the back taxes, plus the fees and interest. This certificate creates a lien on the property. The investor then waits for a pre-determined period of time to see if the homeowner repays the taxes. If he does, the investor will receive back his original investment plus interest, thus earning a profit. If not, the investor may have the option to proceed with a foreclosure and the home will be sold at public auction. Each county operates their tax sales differently, so you should contact your local tax collector for specific information.

Mortgage Considerations

When you obtained your mortgage loan, the property itself served as collateral for the lender. By signing the loan documents, a lien was created or your property was put into a trust -- depending on what state you live in. It will remain that way until the loan is completely satisfied. During the course of repayment, the lender wants to remain in the first lien-holder position. Thus, it wants you to pay your property taxes on time so that another lien isn't filed on the property that supersedes the lender's position. The language in your loan documents probably stipulated that you must pay your property taxes on time. If you took out the loan with less than a 20 percent down payment, your lender probably required you to establish an escrow or impound account. With an escrow account, you pay a little extra each month with your mortgage payment to cover property taxes. When the property taxes are due, the company in charge of managing the escrow (a third party) pays them on your behalf. Mortgage companies may charge higher interest rates if you opt to not utilize an escrow account.

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