Failure to pay property taxes result in penalties and interest on the delinquent payment. In some cases, the property owner can lose the property through a tax lien foreclosure. This helps local governments effectively collect property taxes and provides opportunities for investors.
Late property taxes accrue interest at a rate set by state law or at an auction. The taxing authority may also impose fees for advertising and other costs associated with collecting overdue taxes.
Property taxes are secured by a lien on the assessed real estate. In most jurisdictions, that lien is senior to most other liens on the same property.
Tax Lien Certificates
The county treasurer can collect delinquent taxes by selling a tax lien certificate to a private purchaser. Investors purchasing tax lien certificates earn a high interest rate--up to 16 percent--and can potentially acquire title to the underlying real estate.
Tax Lien Auctions
Instead of continuing to directly pursue property owners for delinquent taxes, the taxing authority sells tax lien certificates at a public auction. Some tax lien auctions are conducted via the Internet.
If the certificate is not redeemed by paying the taxes, interest and fees within a period of time set by state law, some states permit the purchasers of the tax certificate to foreclose and seek to obtain title to the property.
Based in Phoenix, Arizona, Tony Meier started writing in 1998. His first published article appeared in the “Arizona State Law Journal” while he was a law student. Meier is a member of the State Bar of Arizona. He holds a bachelor's degree in finance and a law degree from Arizona State University.