Grandma Got Foreclosed On By A Tax Lien Holder

Greedy miserly christmas man possessive of his cash3 Steps To Take To Ensure That Your Elderly Relative Doesn’t Lose Their Home To A NJ Tax Foreclosure 

‘Tis the season to be jolly’ as they say this time of year. However, for many, the only ones who will be jolly are those ‘tax lien holders’ looking to profit off of the financial misfortune of homeowners who can’t afford to pay their real estate taxes.  A large percentage of those less fortunate and at greater risk of losing their homes to tax foreclosure will be the elderly, some who have become somewhat ‘forgetful’ in the elderly years.  Others who will be on a fixed income and who may not be able to afford the relatively high property taxes that exist in New Jersey.  So if you wish to take action and make sure that your elderly parents or grandparents avoid tax foreclosure resulting in the loss of their home, then this article was written with you in mind.

Few people outside of the real estate industry realize that November -December is the time of year (along with June-July) when municipalities levy liens against real estate properties for unpaid taxes. It’s also the time of year when many homeowners will find themselves one step closer to losing their homes to a tax foreclosure as the municipalities sell those liens to 3rd party tax lien investors.

The city of Newark, for example, will hold their annual ‘tax lien sale’ on December 29th of this year (2015). This public auction will allow the city to collect badly needed revenue despite many of their citizens being unable to pay their property taxes.  Like other municipalities, the city will attach a lien to the tax payer’s house and then sell that lien to a private 3rd party.  To entice the 3rd party investor to buy the lien, the municipality attaches a ‘guaranteed’ rate of return as high as 18%. Thus, the auction often attracts dozens of investors, many who represent powerful hedge funds with millions of dollars to spend.

To be fair, without this revenue, the municipality would be unable to meet its own financial obligations such as meeting the payroll for its fire fighters, police and sanitation workers. So the upcoming auctions will allow municipalities in general (some who are already facing a budget crisis) to collect revenue it normally would have to do without.

The following is a very brief overview of how tax foreclosure works in NJ. It is suggested that Tax Sale Law, N.J.S.A. 54:5-1 et seq be examined and or a licensed attorney in the state of NJ be consulted for a more detailed view of New Jersey’s tax foreclosure process:

1) Typically after 1 year of non payment of taxes (or sewer/water charges), the city will place a tax lien on the property and sell it at its municipal lien auction.

2) A tax lien holder purchases the lien and holds on to it for a minimum of 2 years.

3) After 2 years have lapsed, the tax lien holder is allowed to initiate foreclosure against the homeowner.  There is no auction conducted for a house or other real property in a NJ tax foreclosure (only for the lien).  The foreclosure is strictly between the Homeowner and tax lien holder with the municipality serving as the intermediary in the collection of any tax monies due.

Note, that if the municipality is the entity who actually owns the tax lien (sometimes the lien fails to sell at the auction or for some other reason, the municipality decides not to sell it), then the law allows them to initiate foreclosure after only 6 months.

4) Once foreclosure begins, the process can take as long as 18 months to complete. However we have seen some aggressive tax lien holders complete the process in as little as 6 months.

5) Once the tax lien holder files for and is granted ‘final judgment’, they are the official owners of the property. As a homeowner you want to do everything you can to avoid having a final judgment filed against your home in a tax foreclosure.

In summation, anywhere between 3-5 years can pass (1-2 years if the municipality owns the lien) before a homeowner stops making property tax payments on their home and eventually loses it to tax foreclosure.  This is not a long time when you’re talking about elderly parents who, unbeknownst to their children, failed to pay the taxes on a home. And if the parents are experiencing trouble paying the quarterly taxes when due, imagine how much trouble they can have paying those taxes after 3 – 4 years of non payment (plus 18% interest and anywhere from 2 – 6% in additionally assessed penalties).

So how do you make sure that the home you grew up in (which may also be the one that your parents grew up in) doesn’t get lost to a tax foreclosure? We suggest that you follow these steps to ascertain the house’s tax status and to avoid any future tax problems:

1) Call your town’s tax collector and ask if the house is behind on property taxes. It’s public information and most tax collectors will let you know “yay” or “nay” over the phone. It’s usually easier for them if you give them a block and lot number as opposed to the street address.  You can get the property’s block and lot number along with other public info here:

And if you wish to know the exact amount of monies due on any delinquent taxes, the tax collector may require that you fax in a written request for a ‘tax redemption statement’.

2) Keep an eye out for the property’s listing in the local newspaper.  By law, the municipality has to advertise the public of any upcoming tax lien sales in a local newspaper on at least 2 occasions prior to the auction.

3) Appoint a family member to be in charge of the finances.  Let’s say you call the town’s tax collector and they tell you that the owner of the house is up to date on their property taxes. Or that there is a tax issue but you manage to get it resolvedIn an effort to be proactive, someone in the family (preferably someone organized) needs to stay abreast of all financial matters regarding the house going forward.  Once someone has been appointed in charge, have them call the tax ‘assessor’ (not the tax collector as they are often two separate functions), and have the tax bill sent to the family member now on top of the house’s finances. It will likely require the written consent of the home owner of record.  But this way, whenever the tax bill, a delinquent tax warning or foreclosure notice is mailed, it will go to that person now responsible for managing the house’s finances.

If you have any questions, feel free to give us a call or send us an email and we’ll be more than happy to discuss your situation with you and or answer any questions you might have. And keep in mind that New Jersey has amongst the highest property taxes in the country. So if you or your elderly relatives decide that the taxes are just ‘too darn high’ in this state (and we agree that they are) and decide to sell, remember – we buy houses in New Jersey and in any situation.  So feel free to give us a call and we will be more than happy to submit an all cash offer to buy the property.

Until next time, stay safe, happy and healthy this holiday season.

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