Government Tax Foreclosures Can Result In Cheap Housing
When an individual falls behind in paying their personal or business taxes, the federal and state government has the legal right to attach a tax lien to any and all property owned by that person. When the time comes that the government believes the individual may attempt to shirk their tax responsibility, they can then use that lien to take possession of the property. Once government tax foreclosures are filed, the homeowner has a time limit in which to pay the past due taxes before the government can sell the property at a public auction.
Buyers of homes made available through government tax foreclosures should be aware that the state and federal government offers no warranty on any part of the property when it is sold and the buyer is assuming all risks associated with the purchase. There have been instances in which a buyer proffers the winning bid without seeing the property and after the sale, attempts to back out. The state and federal governments may, at their discretion relieve someone of their obligation to complete the purchase but the 10 percent deposit required at the time of the sale will be forfeited.
Additionally, if the property is resold and the final bid is less than that of the original bid, the person backing out can be held responsible for the difference. Buying home through government tax foreclosures can provide a chance to buy houses considerably below their market value, but buyers must be aware of the dangers involved before bidding.
Not All Tax Sales Are Immediately Final
When a home is auctioned due to government tax foreclosures, many states give the original homeowner 10 days from the date of the sale to pay all taxed due and reclaim ownership of the home. When this happen, the bidder is refunded any deposit they made. Additionally, some states allow buyers to make a follow-up bid, after the auction ends, enabling someone else to buy the property won during an auction. Typically, the bid must be at least 10 percent higher than the winning bid or a minimum amount set by the state.
For those with a federal income tax lien they should be able to avoid government tax foreclosures by making arrangements to pay off the debt. The Internal Revenue Service as well as many state governments offer programs where a compromise offer can be made in order to avoid drastic measures such as government tax foreclosures. However, ignoring the situation usually results in foreclosures without further notice.
