Jul 26, 2024
Most people understand that there’s always the risk of unexpected costs when it comes to homeownership — and it typically crops up in the form of a major repair, like a broken furnace or leaky roof.
That's why it's so important to maintain an emergency fund that covers between three to six months’ worth of money to help cover those financial surprises.
Advertisement
But sometimes, that surprise expense can come in the form of thousands of dollars in unpaid property taxes.
Thanks for subscribing!
Read the best of Moneywise in 5 minutes or less.
By signing up, you accept Moneywise Terms of Use, Subscription Agreement, and Privacy Policy.
Let’s say the home you purchased in 2020 was situated in two counties, and you’d arranged for your property taxes to be paid through your mortgage escrow — only to discover your loan servicer neglected to pay the bills in one of the counties.
That is exactly what happened to one Reddit user who found out he owed $50,000 in unpaid property taxes to one of the counties.
So, what do you do when you’re only given a few months to come up with the money or risk losing your home?
Here’s how you can protect yourself if you owe a hefty chunk of money for unpaid property taxes.
Unpaid property taxes can have serious consequences
Homeowners who have unpaid property taxes will generally receive a courtesy notice in the mail first after a certain amount of time has passed without tax payment.
This passage of time before getting a notice will vary depending on which state you live in. It can range anywhere from a couple months to a few years before a tax collector comes knocking.
Once the taxing authority (for example, your city or township) gets involved, it could make the delinquent amount a lien on your property. This can also result in additional taxes, interest, and penalties.
If you don't get current by the assigned deadline, however, that same taxing authority could force the sale of your property — typically through a tax foreclosure or tax deed process — to recover the money owed.
Advertisement
Although these processes take time, it’s still prudent to act quickly in order to save your home.
Must Read
- The ultra-rich use these 5 real estate strategies to build wealth while they sleep — you can start with just $100
- Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
- Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
How to avoid a property tax shock
The cost of property taxes can vary substantially from one state to another, or even one county to another.
For example, New Jersey has the highest property tax rate in the country at 2.26%. Its median annual property tax bill sits at $8,796.
On the flip side, Hawaii has the lowest property tax rate in the country at 0.27%, with a median annual bill of $1,971.
Advertisement
But regardless of what you're looking at paying in property taxes, it's important to know exactly what you owe. Before you close on your mortgage, review your property deed thoroughly — either on your own or, ideally, with the help of a real estate lawyer.
While you're at it, inspect your property survey. These documents should be made available to you before your closing, and they contain important information about your property's legal boundaries.
If you notice that your property is located in more than one county, like the Reddit user above, you can then call each tax collector's office and figure out what your obligation is.
From there, rather than pay into an escrow, you may want to pay your property taxes directly when they're due (which is typically once per quarter). If you've already purchased your home and didn't review your deed and survey thoroughly, it's not too late to access those records. Just contact your county clerk's office for further instructions.
Be sure to pay attention to property tax assessments you receive in the mail. Your taxing authority will generally send these on an annual basis and, from there, you have the right as a homeowner to file a property tax appeal.
Advertisement
If you receive two separate assessments from two separate counties, that's your first clue that you're in a situation like the one mentioned earlier. From there, you may have some homework to do to figure out who you owe money to and when.
If you end up with a huge underpayment on your hands, such as in the situation above, your best bet may be to enlist the help of a real estate lawyer. They may be able to negotiate a payment plan on your behalf so you don't have to scramble to come up with the money in one lump sum or risk losing your home.
But also, make a point to have a three- to six-month emergency fund to cover surprise bills that arise. In the case of a modest property tax underpayment, a problem like the one above might go away fairly quickly if you have the money to cover your tax debt.
A financial adviser with tax expertise can also be a valuable resource when it comes to avoiding underpayment penalties and to help with tax planning.
You May Also Like
- JP Morgan sees gold hitting $6,000/oz before 2027 — and a Gold IRA lets you hold the physical metal while deferring the tax bill. Get your free guide from Priority Gold
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
