Buying Your Home BACK After a Tax Sale in Louisiana
Scenario this week – one of our sellers just found out that her home was acquired at a recent tax sale…..
How Louisiana Property Tax Sales Work:
As a homeowner if you let your property taxes become delinquent, your parish tax collector will sell your property at a tax sale to satisfy the unpaid debt (La. Rev. Stat. Ann. § § 47:2153, 47:2196). The law is designed to ensure that the parish receives its tax revenue, but it also provides safety procedures so property owners can’t easily lose their properties for an overdue tax bill.
If you are listening and thinking you are about to score big by purchasing properties for pennies on the dollar, I’m going to caution you that the process is long, and advise you to seek legal and financial advice before purchasing a property at a tax sale, but know that some people have built lucrative business by purchasing tax sale properties.
So HOW DOES IT WORK?
The quick version is that the parish tax collector is going to annually (generally in June) publish a list of delinquent properties for sale. Then they are going to sell them at a public “auction” for a flat fee. The original property owner will then have THREE YEARS to redeem the property by paying the purchaser the amount paid, a penalty of 5%, plus 1% interest per month; as well as reimburse the parish the cost to advertise the property for sale. If the original owner doesn’t redeem the property within the 3 yr span, the new purchaser can file a lawsuit to “quiet the title” to obtain full ownership.
Back to our seller – all she needs to do is contact the tax assessor and repay what was owed plus costs and interest with a penalty to reclaim the property to regain complete ownership of her title.
If you are considering purchasing tax sale properties, here is everything you need to know.
- The parish tax collector (usually the sheriff) publishes the delinquent property for sale (usually online, sometime in the newspaper);
- The tax collector sells the property for a flat fee amount at a public “auction”, usually occurs at the local courthouse, but some parishes actually do an online auction instead. (the property tax sales, generally occur annually in June)
- For 3 years, the original owner can redeem the property by paying the purchaser the amount paid, a penalty of 5%, 1% interest per month, plus the cost to the parish for the advertisement of the property for sale;
- After three years, the new purchaser can file a lawsuit to “quiet the title” to obtain full ownership and use of the property
The Tax Sale
Each parish operates a little differently in regards to how they hold their auction. In St. Tammany, the sheriff publishes its tax sale properties in the Advocate and online. The sale usually takes place at the courthouse in Covington in June, and purchasers are required to register before the auction. In St. Bernard, everything is done online again with registration being required prior to the auction.
The sheriff sells the property for a flat fee consisting of the amount of taxes due, plus 1% interest per month until redeemed, plus 5% redemption penalty, and costs for the advertisement and sale of the property.
What does a purchaser get?
The purchaser will get a “tax deed” to the property they purchased, this is not the same thing as a standard deed and does not come with the same rights to possess and use the property.
To simplify, purchasers obtain a limited title that is subject to redemption.
After a tax sale, the owner of the property can redeem the property for a period of three years after the tax collector files a tax sale certificate in the parish’s public records.
To redeem the property, the owner has to pay the purchaser:
- the price paid at the tax sale;
- all taxes paid on the property since the tax sale;
- a penalty of 5% penalty;
- 1% interest per month
The owner must also pay the tax collector for the transaction costs related to the redemption.
The tax sale title does not automatically give the purchaser the right to use or possess the property. As a rule, a tax purchaser is entitled to immediate possession of the property; the purchaser can exercise possession of the property without any formalities only if he can do so without any resistance. For example, if you purchase a vacant lot or building, then you can immediately take possession, cut the grass, etc. On the other hand, if you purchase a home that is occupied, a court will need to be involved if you want to take possession and evict the occupants.
The tax sale purchaser is required to maintain the property and pay the requisite tax obligations. In some instances, the property may be subject to ordinances or other obligations relating to upkeep and maintenance. If so, the owner would be required to cut the grass, maintain the structure, etc.
Quieting the Title
If the redemptive period expires, the purchaser must file a lawsuit called a “quieting title action.” This can be complicated, but in simple terms, the purchaser sues the former owners. The owners defend the lawsuit by attempting to annul the tax sale. If they don’t, the property will officially belong to the purchaser. (La. Const. Art. VII, § 25, HB 256)
The redemption period is reduced for certain properties. The redemption period is reduced to 18 months if the property is blighted (dilapidated) or abandoned (that is, you have permanently moved out) (La. Const. Art. VII, § 25, HB 256).
Even though you’ll get time to redeem your property after a Louisiana tax sale, you’ll end up paying more because of the penalties. If you think you might be overpaying on your tax bill and want more info on getting it reduced, give us a call at 504-509-4771 and we’d love to walk you through the process.
If buying tax sale properties is appealing to you, just know upfront, that you’ll need to be in it for the long haul. At any point an owner can redeem their property, but you’ll be reimbursed fully PLUS interest! The possibility is there for you to at best make 17% interest on your money for the first year and 12% every other year, or end up with the property for a discounted price. If you do successfully sue the owner and quiet the title, you’ll have legal costs to consider, but all in all, you could be walking away with a properties for pennies on the dollar.
As always, if you have any real estate questions you want answered, comment them below or give us a call at 504-509-4771.