Know Your Tax Sales

Eventually every real estate professional will come across a property that is involved in a tax sale. This may mean that you are considering purchasing a property that is advertised for a tax sale. Or perhaps through mistake or oversight, one of your listings has been or is about to be sold at a tax sale. Georgia law permits properties to be sold at both judicial and non-judicial tax sales. It is important to understand the differences between them as both  the title conveyed by the sale and the rights of the owner to get the property back vary greatly with each sale. This article will attempt to highlight the main differences between the judicial and non-judicial tax sales from an investor’s perspective.

The Judicial Tax Sale
(Tax Foreclosure)

Judicial tax sales allow counties and municipalities to foreclose taxes in a manner which is quicker and results in greater certainty of title than a non-judicial tax sale. This process is initiated when the tax collector files a petition for a tax foreclosure in superior court identifying the owner, property, and taxes which are the subject of the action, a listing of the interested parties, and that the relief requested is that the property be sold at public outcry. If the court finds that the allegations of the petition are correct, it will render a decree affirming that the taxes are delinquent and order the property to be sold at public sale.

Any interested party may redeem the property prior to the sale by payment of the taxes, interest, penalties, and collection costs. If the property owner redeems the property prior to the sale, the foreclosure action is dismissed and it is as if no action had been taken. However, if a lien holder redeems the property the action is still dismissed, but the lien holder is given a lien against the property for the redemption amount on equal priority as property taxes.

The sale is “cried out” with a minimum bid comprised of the taxes, interest, penalties, and collection costs and sold to the highest bidder. The sale is final, subject only to the right of the owner to redeem the property by paying the minimum bid into the registry of the court within 60 days from the date of the sale. If the owner redeems the property within that period, the foreclosure action is dismissed and the purchase price refunded to the successful bidder. If the property is not redeemed by the owner, within 90 days of the sale the tax commissioner delivers a deed to the purchaser and files a report with the court identifying whether a sale took place, the sale price, and the identity of the purchaser. If the sale price exceeds the minimum bid, the petitioner deposits the surplus into the court’s registry to be distributed to interested parties in order of priority of their interests.

Upon issuance of the foreclosure deed, title vests absolutely in the purchaser with no open rights of redemption or title marketability issues. Accordingly, many bidders will bid a higher amount than they would at a non-judicial tax sale. However, because tax foreclosures require more front-end involvement from the tax commissioner, many  counties elect to sell property at non-judicial tax sales, shifting the burden of clearing title to the purchaser.

Non-Judicial Tax Sales

The conduct of a non-judicial tax sale is done by a levy on the tax lien and the sale of the property. Once the levying officer receives the liens, he or she sends a variety of notices to the owner of the property and the security deed holder advising of the pending sale of the property, posts a notice on the property, and advertises in the county legal organ. The tax sale is conducted on the first Tuesday of the month on the courthouse steps, between 10:00a.m. to 4:00p.m. The levying officer cries out the sale and solicits bids auctionstyle.

Once a successful bidder is established, the levying officer issues a tax sale deed to the bidder within a reasonable time. The title conveyed by that deed is subject to any interested party’s right to redeem. Those rights cannot be terminated by the tax sale purchaser for at least a year after the sale and requires significant back-end work by the purchaser to convert his/her tax deed interest into fee simple title. This back-end work includes the performance of the administrative procedure to foreclose the right of redemption and the filing of a subsequent suit to quiet title.

Weissman W Logo