Tax Lien Foreclosure

Posted in Finance, Accounting and Economics Terms, Total Reads: 520

Definition: Tax Lien Foreclosure

A tax lien foreclosure occurs when authorities conduct a sale of the house because of the inability of the owner to pay the stipulated taxes (property tax, state tax etc.) on time. The authority first places a lien against the owner of the property.

A lien can be described as the legal right of the creditor to recover his/her money from the debtor by taking over and selling the property. For example when a person takes a car loan from the bank and if that person fails to pay back the instalments for the loan then the bank has a legal right to place a lien against the defaulter. The bank then takes control of the vehicle and sells it to reclaim the money it has provided to the defaulter.

In a tax lien foreclosure the owner of the house is denied the right to claim the ownership of the house and the state or the central government takes possession of the property. The authorities then conduct the auction of the house only if the owner of the property is not able to pay the taxes. Buying such a property is what all the real estate magnets look for as these properties are sold for a discount that offers a chance to acquire property at real cheap rates. The owner of the house (the one who defaults on paying the taxes) cannot take part in auction.

A tax lien can be for a specific property or for all the properties of the defaulter depending on the terms of agreement of the contract. Nowadays when banks are stressed to clean their books of NPA’s, the banks are providing loans by attaching property of the loan takers as a collateral if the loan becomes bad.


Hence, this concludes the definition of Tax Lien Foreclosure along with its overview.


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