In this article, I will hold your hand and walk you through the tax foreclosure process. It is my hope that an understanding of such process will allow some owners to avoid being foreclosed. Based on my experience, I feel that many people are foreclosed on simply because the whole process confuses them. It becomes overwhelming. And, once something becomes overwhelming, it seems human nature to bury your head in the sand.

The following depicts the foreclosure process:

Land Owner: Mr. A
Tax Year: 2012
Note: taxes are collected twice per year; in the summer and winter.

Mr. A has not paid his taxes for 2012. What happens next State Street title people?

Answer: the “delinquent” 2012 taxes are transferred from the municipality to the county in March of 2013. At this time the local municipality washes its hands of the matter. It is now up to the county to ramp up the pressure.

O.k., the delinquent taxes have transferred. What happens next State Street title people?

Answer: over the course of the next year, the county will send a series of notices to Mr. A requesting payment. Interest and penalties will accrue through this time. Assuming that Mr. A does not pay, what happens next State Street title people?

Answer: In March of 2014, the county will file a Certificate of Forfeiture citing the delinquent 2012 taxes. The forfeiture is procedural. Forfeiture must occur prior to foreclosure.

What happens next State Street title people?

Answer: Mr. A will have an additional year to cure the delinquency. In reality, Mr. A is given ample time to right the ship. Let’s assume that Mr. A does not pay.

What happens next State Street title people?

Answer: In March of 2015, Mr. A’s property will be officially foreclosed. After a 21 day redemption period, fee simple title will pass, by operation of law, to the foreclosing county. Game, set, and match. At this time, the interest of Mr. A has been legally terminated.

What happens next State Street title people?

Answer: Mr. A’s property will be sold at auction to the successful bidder.

To summarize, there is a full two-year period in which Mr. A had the opportunity to cure the delinquency. If he had cured, the county would have filed a redemption certificate regarding the certificate of forfeiture. I studied under Dr. Seuss.

It is important for the homeowner to understand that a “forfeiture” is not a “foreclosure.” The forfeiture precedes the foreclosure. My advise is to deal with the county during this time frame; do not run and hide.

Author Note:

In the environs of title insurance, tax foreclosure represents a two-part monster. Part one concerns the foreclosure process itself, as discussed above. Part two concerns the element of due process. And for the title insurer, as well as the purchasers at auction, due process is the Tricky Ricky. Because, until it can be shown that due process was afforded all appropriate parties, title to the land is typically considered uninsurable. And this is really grounded in the basis that the land, post auction, is not marketable.

For the tax investor, as well as the title insurer, it is a two-part formula ** Auction + Due Process = Marketable Title.

Revisit our site soon, as I will be discussing due process as it relates to tax foreclosure.

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