Why some seniors are losing their homes

Seniors may be evicted from their homes as a result of failing to pay property taxes or utility bills. While it is not the norm, it’s a symptom of a growing trend. More and more seniors around the country are being forced to pay large, unnecessary fees – or even lose their homes – as a result of unpaid property tax bills.

Because property taxes aren’t regular monthly expenses like utility or cable bills, they’re often among the first things that seniors overlook if they begin to have some difficulty managing their own affairs. Property taxes are frequently missed by children and caretakers as well.

Many older people who have recently finished paying off their mortgage aren’t used to paying their property tax bills, because for decades they were paid directly by the lender. Surprisingly, every year about $7 billion to $10 billion in local property taxes aren’t paid on time. This figure has increased in the last few years, due in part to the economic slowdown.

When a homeowner fails to pay a property tax bill, what happens next varies from state to state. However, typically the taxing authority will obtain a "lien" against the property, meaning that, in certain circumstances; it can foreclose on the property and sell it to pay the tax debt.

Of course, cities and towns usually don’t want to go to the trouble and expense of foreclosing on people – they just want to get their taxes paid. In most states, a city or town can solve this problem by selling its tax liens to someone else, at an auction.

Who would buy a tax lien? Sometimes big financial companies buy them, and sometimes it’s individual investors who are looking to make money from someone else’s misfortune.

Some states require local authorities to wait for a year or two before selling a tax lien, but some allow them to sell a lien after just a few months – which means that an elderly person who misses a payment could have a problem escalate quickly.

Once a tax lien is sold, there’s usually another period that the buyer has to wait before it can foreclose and sell the owner’s property. This is called a "redemption" period, because during this time the homeowner can redeem the property by paying off the debt.

The problem is that, at this point, the property owner does not just have to pay off the debt; he or she might have to pay a lot more. For instance, the owner may have to pay interest on the debt, plus interest to the investor who bought the lien, plus various fees and penalties

These can add up quickly, in part because the rate of interest is usually determined by state law, and most of these laws were passed many years ago when interest rates were much higher. A rate of 10 to 12 percent is common, and in some places rates can be 18 percent or even much more.

So what initially was a small amount of taxes due can escalate into an alarming and unaffordable amount.

We’d be happy to help if this is an issue for you and/or someone you know. It’s much better to take action quickly as the problem only becomes worse the longer a homeowner delays.