A clear title is probably the foremost requirement in selling property. This means that there’s no outstanding debt, mortgage, tax owing, or other claims on your home, which gives you the license to do whatever you want with it. In short, a clear title indicates that you’re the rightful and legal owner, and this ownership can be passed on smoothly to the buyer.
But what happens if, in the course of your home ownership, certain life events cause you to fall behind on property taxes? And it’s also not the type of financial hole that you can climb out of in the near future, so you can see your tax bill piling up higher and higher…what then?
The only way out that you can see is to just sell your Virginia home, back taxes and all. But is that possible?
In this article, we’ll walk you through what happens when you let the property tax deadline lapse, Virginia’s judicial tax sale process and timeline, and your options in redeeming or selling your Virginia home that you owe back taxes on.
Purpose of Property Taxes
Benjamin Franklin said that there’s nothing certain in this world except death and taxes. Property taxes, to be exact, and for good measure. These taxes, which are levied on real estate and business machinery and equipment, provide critical funding for local government services such as schools, libraries, road construction and maintenance, among others.
Property taxes are the source of one-third of Virginia’s revenue, with $1,960 being the median amount collected annually, from a statewide effective tax rate of 0.77%.
What Happens if You Fall Behind on Property Taxes
In Virginia, tax due dates vary by county, but if you miss the deadline, the outcome will be the same: overdue property taxes become a lien on your property. This lien is a legal claim on your house, essentially turning it into collateral to guarantee your tax debt. On top of that, you will be charged 10% interest until you pay in full. If no payment is made, the local government can then start a process to take your home in order to collect on the amount owed.
Tax Lien Certificate vs. Tax Deed States
The government has three ways of dealing with delinquent property: through a tax lien certificate, a tax deed, or a combination of the two.
In tax lien states, the county government sells tax certificates to private investors to recoup lost revenue. These investors pay the homeowner’s tax bill for them, who then collect the certificate amount with up to 24% interest when it gets redeemed. If redemption doesn’t happen, the certificate holder can potentially be awarded the property for the amount of back taxes owed.
On the other hand, tax deed states have the power to sell your property in what is known as tax auctions. Sale proceeds from the auction are used to pay off your bill, and you end up losing the house. However, don’t panic just yet. Tax sales don’t happen instantly, and you typically have time to get current on your bill.
Virginia is a tax deed state, and if you still haven’t paid your debt by December 31st of the second year that you have missed your payment, the county will initiate foreclosure proceedings, which end in an auction–if you take no action. And while auction rules can vary from county to county, they follow the general framework set out by the tax deed sale process.
Judicial Tax Sale Process
Judicial tax sales are detailed proceedings wherein the county treasurer liquidates your property through an auction in order to collect your outstanding tax balance. The whole process can take up to 18 months, giving you time and opportunity to redeem your house by paying all the back taxes owed, plus interest, penalties, and fines.
Here’s how it goes:
- The county tax collector sends you a notice 30 days before filing a suit in circuit court. The lawsuit seeks to obtain judicial permission to sell the property as payment for back taxes that you owe. This notice is also published in the local paper, advertising the sale of delinquent properties.
- If taxes aren’t paid or a payment plan isn’t negotiated by the 31st day, the lawsuit will be filed. You and other lien holders will also be notified of this filing. The court then determines the fair market value of the property, and a special commissioner of sale will be assigned.
- The special commissioner notifies the public of the upcoming judicial sale, both in print and online. In other counties, they can get offers through a private bidding or through a listing with a real estate agent.
- After the bidding is completed, the court will schedule a hearing to approve the sale. Keys will be turned over to the new owner, and the commissioner will distribute the proceeds from the sale according to priority:
- Litigation costs, including the county’s attorney fees
- Delinquent and prorated property taxes for the current year
- Payment for other liens (mortgage, mechanic’s, HOA, if any)
- Any remaining funds will be given to you
Redemption Timeline
You must remember that you can stop the government from liquidating your home at any point in the foreclosure process. To do so, all delinquent taxes, fines, and fees must be paid by 5:00 pm the day before the auction. You can also work out an installment plan with the county treasurer if you can’t pay everything in one go. Installment plans can be up to 72 months.
Can You Sell Your Virginia Home Even If It Has Back Taxes?
Yes, you can. Outstanding tax debt doesn’t prevent you from selling your property. However, it has a significant impact on the money that you get from the sale. This is because back taxes, interest, penalties, and fines must be paid at closing. Otherwise, the title won’t be cleared, and the sale won’t go through.
When selling your Virginia home with back taxes owing, you must do the following:
- Do a title search to get ahead of anything that may hamper the sale.
- Look up how much tax you need to pay online. Counties in Virginia have websites where you can just key in your details to display the payoff amount.
- In setting your asking price, account for the payoff amount so that you’ll make enough to cover the delinquency and fund your fresh start.
- Pay off your tax bill to halt the tax foreclosure proceedings and clear the cloud on your title.
- Once the debt is paid, the sale is finalized, and ownership is transferred to your buyer.
Selling a delinquent property on your own terms can help you avoid the lasting credit damage that often comes with foreclosure, allowing you to stay in control of the process and protect your financial future. If you need a fast solution, we buy houses in Virginia, making it easier to sell quickly and move forward with confidence.
Options in Selling Property with Outstanding Tax Balance
Sell the Traditional Way
If you’re selling a house with back taxes, one option is to go the traditional route and work with a real estate agent. An agent can manage the entire process for you, from conducting a title search and pricing your home through a comparative market analysis to staging, marketing, showing the property, negotiating offers, and handling the closing process. This can make selling much less stressful, especially if you want professional guidance. However, the downside is the cost—most real estate agents charge commissions of up to 6% of the final sale price. If you need to sell your house fast in Richmond, exploring direct cash buyers or alternative selling options may also help you avoid delays and reduce upfront costs
Sell the Quick and Simple Way
If you’d much rather keep the commission, then you can sell directly to a cash buyer. Cash buyers are real estate investors, cash home buying companies, or house flippers who are looking to buy distressed properties such as those needing extensive repairs, and yes, including homes with outstanding tax balances. With a looming auction deadline, they’re your best bet for a quick and straightforward sale. Furthermore, since they’re cash buyers, they’re not dependent on lenders, so there’s no risk of the deal falling through due to financial woes.
Frequently Asked Questions: Selling Delinquent Property in VA
Does Virginia law allow you to redeem your home after a tax sale?
Under Virginia law, if you want to redeem your home, you must do so BEFORE the tax sale. Once the court approves the sale, it is final, and there is no getting it back. Therefore, if you don’t want to lose your home, you must pull out all the stops to get current with your delinquency. You can borrow money from friends or family, take out a personal loan, or negotiate with the county for an installment plan if the tax bill has grown too big.
What if you fail to pay the agreed installment amount?
Defaulting on your installment payment can void your agreement with the county. You will be provided with a written notice and the foreclosure will resume. And to top it off, you won’t be given a chance to negotiate another agreement for up to 3 years after you defaulted.
How can you tell if you owe unpaid taxes on your home?
If you haven’t received a bill or a notice regarding your property taxes, you can look up your payment records online or run a title search. A title search costs about $250, but it’s a small price to pay instead of dealing with future complications that may arise from being delinquent.
Closing Thoughts: Selling Property with Back Taxes in VA
Virginia is a tax deed state, which means the government can automatically sell your house from under you if you fail to pay your property taxes. Fortunately, it doesn’t happen in an instant, and you can have up to 18 months in order to get current on your tax bill and stop the foreclosure. If you sell this way, you avoid the hit on your credit score that comes with letting the tax foreclosure sale happen.
If your delinquent property is on the auction block and you feel like you have no options left, Cash for Houses Girl is here for you. We’ll buy your property fast, and for cash, so that you can redeem your property and have some money left over for a fresh start. You also don’t have to worry about its condition, as we buy all types of real estate as-is.
Curious about our offer? Fill in our form below with your property address, email, and phone number. We don’t charge commissions or hidden fees so you get everything that’s on offer. Once you accept, we can close in a matter of days so you don’t have to stress about getting foreclosed.
For more information, Cash For Houses Girl buys houses for cash—give us a call today at (804) 376-8771 and ask for Amanda. We look forward to the opportunity to work with you!
Helpful Virginia Blog Articles
