Property Tax Challenges
Do you have property tax challenges?
Texans pay high property taxes. It’s a part of being fortunate to own real estate here, but it’s not always easy to maintain the debt load.
Many who are still paying mortgages on their property are including their tax payments by escrowing them as part of their monthly payments. For those who are not escrowing taxes in their mortgage payments, or for those who have no monthly payment obligations, a tax bill can be a nasty surprise at the end of the year. Generally, total tax obligations on real property in Texas amount to between two and three percent of the taxable value of the property. For instance, the owner of a piece of property with a tax value of $200,000 will owe between $4,000-$6,000 each and every year. And as the bill usually arrives in November, that can be a shock. Deciding between Christmas gifts for the spouse and kids and paying the tax bill can be a really tough call!
One thing is certain. Miss enough tax payments, and the taxing entities will look to collect by foreclosing on the property.
TAXES ARE DUE ON THE FIRST DAY OF JANUARY EACH YEAR, AND ARE CONSIDERED LATE ON THE FIRST DAY OF FEBRUARY OF THAT YEAR. The bill arrives in October or November in most households. Taxpayers have until the end of January each year to pay their taxes and avoid penalties. Pay just a day later and face penalties. The penalties grow each month that taxes owed are unpaid. Attempts to collect on unpaid taxes differ among entities, with some allowing more than a year to pay without facing foreclosure. Some move faster.
PENALTIES FOR NON-PAYMENT MOUNT UP FAST. Further, they are largely non-negotiable. The government wants what it’s owed. It will collect – one way or the other.
FOR CERTAIN PEOPLE, TAXES CAN LEGALLY BE DEFERRED. Senior citizens, for instance, can defer their taxes. They can choose not to pay their annual taxes for a premium each year. Seniors may also cap certain taxes at their current levels, such as school taxes.
FOR THE REST OF US, IF WE DON’T PAY, WE LOSE. Taxing entities will foreclose on the property eventually.
TAXING ENTITIES CAN ONLY COLLECT WHAT THEY ARE OWED. That means that anything collected at a tax foreclosure sale above and beyond the owner owed to the taxing entity and any other creditors would be refunded to the owner. As an example, the owner owed $20,000 in taxes. The property sold for $100,000 to a third-party buyer at the tax sale. If there are no other liens or obligations owed, the owner (now the former owner) would receive the difference ($80,000, minus fees and costs of sale).
TEXAS LAW PROVIDES FOR PROPERTY OWNERS WHO LOSE PROPERTY TO TAX FORECLOSURE TO GET THE PROPERTY BACK. That’s right. If an owner loses a property to tax foreclosure in Texas, there is a redemption period during which the property can be repurchased. That period differs on the type of property and the designation. For homestead property, the redemption period is two years. For residential property without a homestead designation and commercial property, the redemption period is 180 days from the sale date. For those exercising the option to redeem, a premium will apply. For residential non-homestead property, the redeeming party will pay the auction price plus a premium of 25 percent of the total amount. In the case of homestead property, the cost is the total auction amount plus 25 percent if redeemed anytime in year 1, or the total auction amount plus 50 percent if redeemed in year 2.
SELLING THE PROPERTY PRIOR TO THE TAX SALE ENSURES THE OWNER OF GREATER CONTROL AND FLEXIBILITY. This can happen several ways. We, for instance, have created a revolutionary procedure that will give the property owner an opportunity to get out from under the tax burden and still have the opportunity to own the property. Contact us for more information.