What to Know About Tax Sales
By Zechariah Yoder
For some, tax sales are wonderful investment opportunities with significant financial upside. For others, tax sales are frightening and threating to what is typically one’s most significant possession, their home. So, what are tax sales and why should I pay attention to them?
With respect to county government, real estate taxes are perhaps the most important stream of revenue. County governments rely heavily on the money they receive from the property taxes. Like a mortgage foreclosure for a mortgage company, county governments have a mechanism to guarantee tax revenue, the tax sale. Property taxes in Indiana are due in the spring and in the fall. If one fails to pay their property taxes and remains delinquent, the county may seek the court’s permission to sell the property at a tax sale in order to pay the delinquent property taxes.
After a judge determines that a piece of real estate is to be sold, the tax sale process has three major stages: (1) the sale of property; (2) the redemption period; and (3) the transfer of property.
1. Sale of Property
Tax sales normally occur in the fall, between September and November. The county auditor will compile a list of properties that are to be sold at the tax sale and publish notice of the tax sale, including information about each property, to the general public. The auditor will also establish minimum bids for each property, which minimum bid will be sufficient to satisfy the tax delinquencies on the properties being sold. Each property will start at the minimum bid and participates will have the opportunity to bid on the property. The highest bidder wins and pays the amount bid. Upon payment of the purchaser price, the highest bidder (“purchaser”) is given a certificate of sale.
2. Redemption Period
The issuance of a certificate of sale triggers the redemption period, which lasts for one year. While the purchaser “bought the property,” the purchaser does not yet own the property and has no right to enter or possess the property. The redemption period provides the current homeowner with one final opportunity to pay the delinquent taxes and keep their property. The homeowner is also obligated to pay additional costs. These costs include an additional percentage on the minimum tax sale bid, an additional percentage on any surplus or overbid on the property made by the purchaser, and certain fees and costs that may have been incurred by the purchaser.
Likewise, the purchaser has obligations during the redemption period. The purchaser must provide notice to the homeowner that he purchased the home at a tax sale and that he intends to apply for a tax deed if the property is not redeemed. These notices have stringent requirements and must be strictly followed.
If the homeowner fails to redeem and the purchaser fails to follow the notice requirements, the property reverts back to the county and the county may sell the property at a subsequent tax sale.
3. Transfer of Property
If the homeowner does not redeem the property within a year, and the purchaser has met all the notice requirements, the purchaser may ask the court for the issuance of a tax deed, which transfers ownership from the homeowner to the purchaser. The purchaser must present the court with evidence showing that the purchaser met the notice requirements. The purchaser must also provide the homeowner with additional notice and an opportunity to object to the issuance of a tax deed.
Upon determining that either no objections exist or that no objection is justified, the court will order the auditor to issue a tax deed to the purchaser. Such a tax deed concludes the tax sale process and purchaser takes ownership of the subject property.
The tax sale process can be complicated and stressful. If you have any questions or need help navigating the tax sale process, please do not hesitate to reach out to our office with any questions you might have.