If you find yourself delinquent on your property taxes, it goes without saying that you could quickly find yourself in a much worse situation. As soon as you become delinquent, interest and penalties can begin piling up, ensuring that it becomes even more difficult to get in the clear.
However, on top of that, you could also be foreclosed upon too, leaving you without your home or commercial building and plenty of debt as well. This is why so many in the Lone Star State opt to dig themselves out of this hole with a Texas property loan.
What Is a Texas Property Loan?
The name is actually a bit of a misnomer, as you’re not really receiving a loan, strictly speaking, though the outcome is much the same. This is why these transactions are instead often referred to as tax lien transfers (TLT).
Like with a loan, you use collateral to secure the money you need. In this case, you’ll be transferring the tax assessor’s lien to a property tax lender in order to receive help. However, the tax lender is not funding the loan to you. Instead, they simply pay the balance you owe on your property taxes directly to the taxing authority.
In return, you then owe the tax lender that money, plus whatever other fees or interest were include in the terms of the agreement (both are usually small amounts).
Depending on how much money you owed in property taxes, it can take between a few months to multiple years to pay off the loan. This makes sense when you consider that the average amount of one of these liens in Texas is around $12,000. However, most tax lenders will consider delinquent amounts above $2,500 for a tax lien transfer.
How You Go about Receiving a Texas Property Loan
In terms of the application process, a tax lien transfer is very similar to a traditional loan. As soon as you receive a notice of past due property taxes, you should begin the application process. Start by finding a lender that specializes in this type of transaction. These days, it’s also worth shopping around a bit—though don’t take too much time—as the industry has become so competitive that most lenders offer low rates, low fees, and flexible repayment terms.
Once you select a lender, you’ll fill out and submit an application. The lender will review it, offer you terms, and then approve the transaction if you find them agreeable.
At this point, you sign closing documents including one that transfers the tax assessor’s lien on your property to the tax lender. Then you begin making payments to the tax lender. It’s actually not so different from a traditional mortgage, when you consider the collateral involved and the repayment plan that follows; however, this transaction is not a new indebtedness, rather a transfer of an existing obligation to a tax lender that offers flexible repayment terms.
Considering Other Benefits
Trying to pay off anywhere close to $12,000 in one lump sum is never going to be easy. Remember that the entire time, you’re also trying to fight off the interest and penalties from the tax assessor that are up to 48% in the first year of delinquency. However, as we mentioned above, many are also racing against the clock to prevent a foreclosure. No matter how hard they try, paying down their taxes may be impossible in time to save their property.
Property taxes that are delinquent past July 1st are subject to a 20% attorney fee. Additionally, the tax assessor’s attorney can file a lawsuit against the property owner and obtain a judgment, which will ultimately lead to foreclosure of the property. The tax assessor’s attorney will charge legal fees for filing the suit thus increasing the amount owed.
Unfortunately, that means even more fees and costs added to the original sum. This is why an immediate solution like a Texas property loan is such an attractive option.
When you consider that the entire process is so simple, property tax loans make a lot of sense for individuals who have fallen on hard times. Unfortunately, certain politicians and consumer advocacy groups have been campaigning to give them a bad name.
However, given the other options available to those delinquent on their taxes, the likely consequences, and the fact that Texas receives over $200 million in tax revenue from this source alone, it’s tough to argue that this solution should be taken off the table.