Tax Sale: Definition, How It Works, Two Types

澳洲幸运5官方开奖结果体彩网:The Investopedia Team

Updated March 11, 2025

Reviewed by

Lea D. Uradu

Fact checked by

Amanda Jackson

Definition

🤡A tax sale is w💙hen real estate is sold due to unpaid property taxes.

What Is a Tax Sale?

When a taxpayer reaches a certain point of delinquency in their owed property tax payments—that is, they haven't paid their property taxes for a certain period of time—the property may be sold in what's called a tax sale.

Key Takeaways

A tax sale is when a piece of real estate is put up for sale because there are unpaid property taxes.
There are two types of tax sales: a tax deed sale, which sells the property, including unpaid taxes, at auction; and a tax lien sale, which sells the liens on the property to a buyer who may then pursue the collection of monies owed.
Before or after a tax sale, during a right-of-redemption period, a property owner may pay off their tax debt and reclaim the property.

Understanding Tax Sales

In most areas, the basic requirement for a tax sale to proceed is that adequate notice is given to the taxpayer to pay the outstanding taxes. In addition, the sale usually must be open to the public. There is usually a waiting period that ranges from several months to several years before tax collection agencies are involved.

When a tax sale is triggered, the property owner has a right-of-redemption period. During this period, the property owner has the opportunity to pay off the delinquent taxes in full and reclaim the property. If the property owner fails to pay the back taxes, along with any accrued interest, the property is then eligible to be sold at auction or through other means by a governmental entity.

When a property goes to auction in a tax sale, the minimum bid price is usually set at 80% of the forced sale value of the property after subtracting any liens, based on the 澳洲幸运5官方开奖结果体彩网:fair market value as determined by the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS).

2,500

The approximate number of U.S. jurisdictions—cities, townships, and counties—that allow tax lien sales, across 23 states.

Tax Lien Sale vs. Tax Deed Sale

There are two types of tax sales that can occur when a property has unpaid property taxes. The first is a 澳洲幸运5官方开奖结果体彩网:tax lien sale, and the second is a tax deed sale. In a tax lien sale, the liens on the home are 澳洲幸运5官方开奖结果体彩网:auctioned off to the highe♏st bidder, which gives them the legal right to demand lien collection, along with interest, from the property or homeowner. In the event that the property owner is unable to pay the liens, the bidder who purchased them can have the property 澳洲幸运5官方开奖结果体彩网:foreclosed.

Tax lien sales are both an incentive for the lien buyer to make money off the interest of the lien and a way to force the property owner to pay the outstanding taxes. Tax lien sales are only legal in 23 states in the U.S., and each state has its own cap for the maximum amount of interest that the new lien owner can accrue in interest.

A tax deed sale, in contrast, sells the entire property, unpaid taxes included, 澳洲幸运5官方开奖结果体彩网:at a public auction.

Jurisdictions may offer a right of redemption after a tax deed sale, which allows a homeowner to get their property back within a redemption period if they reimburse the purchaser the amount they paid at the sale.

What Can Cause a Tax Lien on a Home?

Tax lie𝓀ns may arise for pas🅺t-due tax bills, including property tax, school tax, municipal water or sewer bills, and so on. The IRS or state tax authority may also put a tax lien on a home in the event of unpaid income taxes.

How Do I See If There Are Any Tax Liens on a Home?

Generally, tax liens are a matter of public record and can be found at a municipality's property records office (or website). This may be the office of the town county clerk or tax assessor.

How Can I Buy a Home That's Subject to a Tax Sale?

Tax sales are often conducted via auction by a municipality (e.g., via the sheriff's office) and are publicly announced. You can often find auction announcements in local newspapers or online. You could also contact a municipality directly and inquire. Note that the tax lien is attached to the property itself, and not to the previous owner. This means that the buyer of the property will also have to satisfy the tax lien before the title can change hands.

The Bottom Line

A tax sale is when real estate is put up for sale due to unpaid property taxes. Every state has its own laws for tax sales that must be followed for these sales to 🔴be valid. The laws will vary based on which entity is requiring the taxes, whether it is a local or state jurisdiction.

澳洲幸运5官方开奖结果体彩网