Report: Some lose homes over as little as $400
Why in some states it’s important to pay the taxes ahead of the mortgage if you are in financial trouble.
The rules for property tax sales can be confusing, especially to elderly people who can’t keep track of their finances and people in minority-heavy communities that were targeted by subprime lenders. Here’s how it works:
- The government files a public document called a tax lien saying that it can seize the property if the taxes remain unpaid.
- If the taxes aren’t paid, the government auctions the lien to investors. Past investors include JPMorgan Chase, Bank of America and people who respond to Internet get-rich schemes, the report said. Homes typically are sold at steep discounts.
- For a limited time, the homeowner may buy back the home by paying to the investors the purchase price of the lien, plus interest, fees and other costs. That’s possible because investors haven’t bought the home itself - they have purchased the tax lien, which gives them the right to seize the home later.
- If the owner fails to pay all the costs, investors can sell the home at a big profit compared with the cost of buying the tax lien.
The report said state governments should make it easier for homeowners to retake their homes after tax lien sales. It said they should limit the interest and penalties investors can charge and increase court oversight.