Selling A House With Delinquent Property Taxes In Florida

When you own property in Florida, you must pay property taxes every year. About 70% of local government revenues come from property taxes, providing critical lifeblood for public infrastructure and services, such as police and fire protection, road construction, emergency rescue services, and funding for parks, libraries, and public schools. These taxes aren’t borne by homeowners alone, as businesses account for about half, since even their equipment and machinery are taxed. 

With a tax rate of 0.78%, Florida ranks 27th out of 50 states. And since how much property tax you need to pay depends on your home’s fair market value, it can quickly add up and get out of control. To illustrate, Florida home prices are up 1.8% this year compared to last year’s, so with a median price of $417,000, you might be owing over $3,000!

If you’re a homeowner who’s struggling to keep up with skyrocketing property tax bills, or you’re someone who’s fallen hopelessly behind, then you might be thinking that selling your Florida home is the only way out. In this article, we’ll walk you through the process of selling your house with back taxes, including selling a house with delinquent property taxes in Florida, how these back taxes affect and impede the sale, how to navigate around this roadblock, and what options are available to you.

Property Tax Collection in Florida

Annual property taxes in Florida are due between November and March and must be paid by April 1st. There are counties that offer discounts for paying early, starting with a 1% discount if you pay a month early in February and up to 4% if you pay it way ahead in November. On the other hand, if you fail to pay, your property taxes will be treated as delinquent, and the state can start a process that may eventually lead you to lose your home.

Florida Tax Liens

Florida and 4 other states (Nevada, Illinois, Ohio, and Pennsylvania) utilize a hybrid system of handling delinquent taxes through tax lien certificates and tax deeds. A lien is a legal claim on an asset that serves as collateral to back the debt. They serve to ensure that the lien holder is paid what is due them before the property changes hands.

Tax liens are considered a first-position lien on the property, which means that the county has the priority in assuming ownership if you fail to get current with your past-due taxes. 

On the other hand, a tax deed transfers ownership of the property owing back taxes to someone else (either the government or another individual) after a tax sale.

In case you decide to sell your home to avoid losing it to the government, the sale proceeds you will receive will be net of the back taxes, applicable penalties, and interest owed. In this way, the local government gets its fair share no matter what. 

How It Works

When you fail to pay your property taxes, the county doesn’t automatically take your Florida property. Instead, they sell tax lien certificates to third parties such as real estate investors in order to collect the amount owed. Essentially, the buyer of the certificate will pay your delinquent tax for you, and they will be rewarded with guaranteed interest of up to 18% once you redeem the lien certificate. 

Tax Deed Sale Timeline

Under Florida law, you have a three-year grace period on your tax delinquency before your home is auctioned off in a tax deed sale. Here is what happens once you fail to pay taxes on your property come April 1st:

• April 2nd, Year 1 – You now have a delinquent property, which will start accruing 3% interest on unpaid taxes
• May-June, Year 1 – The county will auction off your tax certificate, and you will now owe the certificate holder the total of your unpaid taxes, and 18% on top of it
• April 2nd, Year 2 – You now owe two years’ worth of taxes, which is steadily accruing interest and penalties
• April 2nd, Year 3 – The holder of your tax certificate is now eligible to apply for a tax deed, and the county will hold a public auction in a few months. Don’t lose hope, though! Even if the sale is already scheduled, you can pay off your tax debt plus any interests or penalties in order to redeem your property.
• Tax Deed Sale – If you don’t take any action towards redemption, ownership of your property will transfer to the highest bidder, and you will lose everything, including any equity that you have built. 

Cost of Unpaid Property Taxes in Florida

How big can a property tax bill actually get, and why do so many people fall behind? 

Let’s take a look at the example given at the beginning of this article. A house valued at $417,000 with a $3,250 tax owed at Florida’s 0.78% tax rate. If you fail to pay on April 1st, you’ll be slapped with the following:

• 5% late penalty – $160
• 18% interest on the tax certificate – $585
• administrative fees – up to $250

By the time April 1 of Year 2 rolls around, your $3,250 tax bill will have grown to $4,245. 

If you let it lapse once more, you’ll end up owing $7,495 because interest and penalties are applied to the unpaid balance to date. 

If you end up not paying for 3 years, then you will be required to settle $12,670, or else your house goes into auction. 

In the end, your $3,250 annual tax bill balloons after three years, and now it’s quite easy to see why some people don’t manage to get out of this hole.

Property Tax Lien vs. IRS Tax Lien

When paying off property taxes, you don’t have to do anything extra. You just go ahead and redeem the tax certificates by paying the amount owed, which includes penalties and other charges. In line with this, if you need to sell the house to come up with the cash, you just have to make sure that it gets paid after you close with the buyer, and then you walk away free and clear. 

However, if you have a federal tax lien attached to your assets arising from a tax debt (such as unpaid income taxes), it is not as simple and straightforward. For example, even if you have used up all your home sale proceeds to pay off the IRS tax lien, and there is still some balance remaining, it won’t be forgiven, and the IRS will exercise its right to collect it. Furthermore, having an IRS tax lien negatively impacts your credit score, which might also make it tough for you to secure financing for your next home. Therefore, it is imperative that you consult with a tax attorney to resolve the IRS lien as soon as possible.

Can You Sell Your Florida Home Even If It Has Back Taxes?

Yes, absolutely. Back taxes aren’t an impediment to a successful sale. It just shaves off a portion of what you would have made from the sale since it must be paid upon closing.

Generally, selling a Florida delinquent property proceeds as follows:

1. Run a title search to discover clouds on the title, such as tax liens, mechanic’s liens, judgment liens, etc.
2. Go to your county tax collector’s website and search for your property address. It will display the payoff amount, including interest accrued, penalties incurred, and other charges.
3. Factor in the payoff amount to your selling price to ensure that you’ll have enough to cover the delinquency.
4. Tax certificates are redeemed at closing before you receive the proceeds.
5. With the liens cleared, ownership is transferred to the buyer.

How to Sell Your Florida Property with Delinquent County Taxes

Selling the Traditional Way

You can go the traditional way by working with a real estate agent to list your property on the MLS. They can help price your home accordingly and factor in the liens that must be paid off so you’re sure to have enough to cover everything once the dust has settled. You’ll also benefit from their wide reach of potential buyers, as well as their rich industry experience. Furthermore, agents typically handle everything from listing to closing, so you don’t have to. They’ll also pay off any and all outstanding liens to ensure that the sale goes smoothly. 

And while it all sounds well and good, there’s a drawback. At the end of it all, you’d have to pay commissions of up to 6%. Using our previous example of a $417,000 median Florida home price, you’re looking to pay $25,000 in agent commissions. That’s…a lot. If you want to save on commissions, you can try selling the house yourself through For Sale By Owner (FSBO). But do note that FSBO typically sells for only 82% of agent-assisted sales, so that $417,000 would only net you $340,000. That’s a painful pay cut! 

So it’s natural to wonder if there’s a better alternative. Well, you can consider…

Selling to Cash Buyers

A Florida property saddled with tax liens may turn away your average Joe home buyer. After all, it is much easier and straightforward to purchase a house without associated baggage. Furthermore, regular buyers often operate on a longer timeline and cannot be relied upon in case of a tax deed emergency, especially if they’re waiting on financing approval. And, with the aforementioned tax lien attached to the property, they may have a tough time securing a loan. Hence, your best bet to find cash home buyers in Florida for a quick sale, especially with a looming auction deadline. 

Cash buyers are investors, flippers, wholesalers, and cash-buying companies looking to buy distressed properties, including houses with liens on them. When dealing with them, you’re guaranteed a fast sale since they’re not dependent on lenders. They have cash on hand and are ready to deploy for this purpose. What’s more, you skip paying agent fees since you’re dealing directly with the buyer. They also purchase properties as is so you don’t have to spend time and effort getting your house ready for open houses, giving you more time to plan ahead so that you can move forward more smoothly.

Frequently Asked Questions: Selling Property with Back Taxes in FL

Can I sell my house if I have unpaid taxes for the past 3 years?

Yes, there’s nothing preventing you from selling your house even if you have 3 years’ worth of outstanding property taxes. In fact, even if the tax sale auction is already scheduled, you can still go ahead with the sale, as long as you’ll be able to close just in time to redeem the tax lien certificate.

Can I sell my house if I have outstanding property taxes and have zero or negative equity?

This one is a little tricky. If your mortgage balance and your back taxes together are more than what your house is worth, the only option left might be a short sale. With a short sale, you need to ask your lender’s permission to do so since they’re essentially being forced to accept less than what they are owed. 

And while the mortgage company might agree with this and forgive your debt, it’s a different matter with the county. Unfortunately, property taxes aren’t negotiable, and they must be settled in order to remove clouds from the title. Your options for this include paying the balance out of pocket, which is a remote chance. Otherwise, you wouldn’t be in this predicament in the first place, like taking out a personal loan to pay the debt or negotiating with the buyer to pay the taxes themselves. 

If you don’t do any of the above and just let the tax deed auction run its course without taking action, it’s going to be very bad for you. If you lose the house, your credit will be destroyed, and you’ll still owe on your mortgage. 

Can I sell my property with both delinquent taxes and pending major repairs?

Yes, there are no issues selling a property needing major repairs and having back taxes as far as the process is concerned. However, you will be hard-pressed to find a regular buyer who is willing to take on such a daunting project. In a case like this, marketing your home should be geared toward a special kind of buyer: the cash buyer. They can be real estate investors, house flippers, or cash home-buying companies that specialize in problem properties. They typically close fast, so even if the tax deed auction is already scheduled, they can certainly help meet your timeline and redeem the tax certificate.

What happens if you lose ownership of your property through a tax sale?

What happens depends on whether you own the property outright or you still owe on your mortgage.

• Scenario 1 (You own the property): You lose the house and take a hit on your credit.
• Scenario 2 (You still have a mortgage balance): You lose the house, downgrade your credit, and, to top it off, you’re still on the hook for paying your mortgage balance.

Neither of these ends up pretty. You must do everything possible in order to avoid having the tax sale go through.

Closing Thoughts: Selling Your Florida Home with Delinquent Property Taxes

Dealing with outstanding taxes requires being proactive and not merely being a passive homeowner. The worst-case scenario is letting the tax deed sale happen. You lose everything, tank your credit, and still be deep in debt. If you’re pressed for time or can’t afford to pay off all your unpaid dues upfront, you can opt to sell your house for cash.

Here at Revival Homebuyer, you don’t have to worry about coming up with the cash to redeem your tax lien certificate. As trusted cash home buyers in Tampa and nearby cities in Texas, we make it simple to move on even if your house is next on the auction block. We’ll pull out all the stops so that you won’t have to suffer the consequences of a tax deed sale. We’ll deal with your troubled property so you don’t have to. In fact, as a reliable company that buys homes in Florida, we buy all types of real estate in absolutely any condition as-is, needing major repairs, stacked with liens, you name it. We’ll buy it!

Once you fill out our form with your property address, phone number, and email, we’ll have a free, no-obligation cash offer delivered straight to your inbox. If you’re happy with our offer, we can close quickly on the date that you choose!

If you’d like to tell us more about your Florida property or you want to know more about our process, feel free to contact us at (813) 548-3674. We’re looking forward to working with you!