Who would think an unpaid water bill of $362 could cause someone to lose their home? That happened to Vicki Valentine of Baltimore, Maryland, after the city sold her debt in a confusing and sometimes-controversial legal process called a tax sale. "It's like someone forcing you out of something that belongs to you. I don't get it," she said.
Many local governments have started using tax sales to recover relatively small debts that residents owe them for things like property taxes and water bills. Instead of collecting overdue money themselves, cities put a lien on delinquent properties and sell the lien rights to investor buyers in an auction. The investors sometimes buy the right to collect taxes and other municipal debts from property owners for only a few hundred dollars.
The tax sale allows the investors to then charge fees and steep interest rates, which can skyrocket to up to 18 percent annually. In Valentine's case, fees and interest added up to more than $3,600, nearly 10 times the amount of her original bill. After her steadily-increasing bill was not paid for two years, the investor who bought the city's lien on her property foreclosed on her home and evicted her, even though the mortgage was paid in full.
Tax sales can affect anyone with overdue municipal bills, even if their mortgage is fully paid. More cities are using tax sales because they receive money up-front without the expenses of debt collection or foreclosure proceedings by selling debts to investors.
To avoid a tax sale:
- Pay municipal bills on time to prevent tax liens.
- Contact the city to shut off services instead of continuing to be charged for them.
- Seek the advice of an experienced foreclosure and bankruptcy attorney to control costs and help you stay in your home.
If a tax lien has been placed on your property, contact an experienced foreclosure and bankruptcy attorney to help you assert your rights.
