Tax Overview, Due Dates, Exemptions and Tax Sales

Real estate (property) taxes are levies that are assessed on real estate by the local government. 

  • The tax amount is determined by several factors, including the use of the land (residential, commercial, or industrial), the assessed valuation of the property, and the tax rate
  • Real estate (property) taxes are usually assessed by county, city and school districts
  • Other assessments, such as ground rent, Municipal Utility District (MUD), Planned Unit Development (PUD) may also be collected

Property Tax Exemptions

Homestead exemptions provide some relief from property tax.  A certain amount or percentage of the primary residence is considered exempt from taxes.  Homeowners who meet certain conditions, such as being over 65 years old, a veteran or disabled, may claim additional exemptions.  The rules vary significantly from state to state.

Property exemptions are not automatic.  The homeowner is responsible to apply for any property exemptions that he/she may allow to qualify.  

  • The servicer does not have the authority to apply for an exemption on behalf of the homeowner
  • Some states or taxing authorities may require an annual certification from the borrower for the exemption to remain effective.

 A Homestead Application is not sufficient to make adjustments to the tax amount.

Fairway will not calculate the estimated tax based on a new assessment. The borrower must provide an estimated amount from the tax collector/assessor. 

  • This is an industry standard
  • It is acceptable to use the prior year tax rate and the new assessment however, the local tax authority or assessor must provide this information in writing

Due Dates
Each local government establishes the due date of the taxes.  Some counties offer discounts for early payment.  The frequency of the payment can also vary.  Some jurisdictions require taxes to be paid once annually.  Others require semi-annual or quarterly payments. 

If the taxes are not paid by the due date, the taxing authority will assess penalties and/or interest on the amount due.

Unpaid real estate tax bills may result in a lien being placed against the mortgaged property. 

If the tax bill remains unpaid, the property can be sold (tax sale) to satisfy the tax debt.

Tax Sale

A tax sale is the sale, conducted by a governmental agency, of real estate property for delinquent taxes.  It is used to collect delinquent taxes owed.

Ordinarily, the tax collector is required to make and publish a list of properties on which taxes have not been paid.  The purpose of a notice of a tax sale is to warn the owner of the property that it will be sold and to furnish information to prospective buyers.  State statutes regulate the manner in which tax sales may be conducted. 

Typically, a tax sale is open to the public in order to ascertain that a fair price for the property will be obtained in the open market.  The owner of property that is the subject of a tax sale is given a statutory right of redemption – that is, if, within a certain period, the owner pays the back taxes plus any other legal charges due, he or she will regain complete ownership of the property free of the prior tax debt.  Redemption must occur within the time and in the manner specified by the statute.