Selling Texas land with back taxes: how it works

Yes, you can sell land with delinquent taxes

Unpaid property taxes don't block a sale. They just have to be settled as part of it. In a normal Texas land sale, the title company finds out exactly what's owed, and pays the taxing units out of the sale money at closing. You receive what's left.

The standard Texas contract for vacant land (the TREC Unimproved Property Contract) expects the seller to show the taxes are paid and allows liens to be paid off from the sale proceeds. So a buyer and title company will expect the back taxes to be cleared at closing, and they'll come out of your side of the money.

How Texas penalties and interest add up

Texas property taxes become delinquent if they're not paid before February 1 of the year after they're billed. From then on, two charges grow at the same time:

• Penalty: 6% for the first month, plus 1% for each extra month, up to a flat 12% on July 1.
• Interest: 1% a month, with no cap. It keeps running until the bill is paid.

Here's what that means for a $1,000 tax bill:

The July jump. Many taxing units hire collection attorneys, and from July 1 they can add a collection fee of up to 20% of the tax, penalty and interest. It's optional for each taxing unit, and the collector must send you a notice first, so check your statement. After July, interest keeps adding 1% a month, and the next year's bill arrives on top.

Why the tax lien follows the land

Every January 1, a tax lien attaches to the land for that year's taxes, penalties and interest. Three things about it matter when you sell:

• It stays with the land when ownership changes, so a buyer won't close until it's paid.
• It ranks ahead of a mortgage or other liens, even older ones.
• Whoever owned the land on January 1 stays personally responsible for that year's taxes, even after selling.

When the county can sue, and what happens next

A taxing unit can file a lawsuit to collect as soon as the taxes are delinquent. Many counties wait longer, but the law doesn't require them to. If the taxing unit wins, the court orders the land sold.

Tax sales are held by the sheriff or a constable, usually at the courthouse on the first Tuesday of the month, and some counties run them online. You can stop a sale by paying the full judgment amount before it happens. If nobody bids enough, the land goes to the taxing unit.

A tax suit adds court costs and legal fees to what you owe. The longer it runs, the less of the land's value is left for you.

Your options if you're behind

If you don't plan to use the land, selling before a tax suit usually leaves you with the most money. You choose the buyer and the price, and the taxes are cleared in the same transaction.

What happens at closing

1. The title company orders a tax certificate from the tax collector. It shows every delinquent amount on the land.
2. The closing statement lists the payoff: back taxes, penalties, interest and any collection fee, plus your share of the current year's taxes.
3. The title company pays the taxing units directly from the sale money.
4. You receive the rest, after any other liens and your closing costs.

For the full picture of what a sale costs, see our guide to the costs of selling land in Texas.

If the land has already been sold at a tax sale

You may still be able to get it back. Texas gives former owners a right of redemption, counted from when the buyer's deed is recorded:

• 2 years if the land was your residence homestead, was designated for agricultural use when the suit was filed, or is a mineral interest. You repay the buyer's bid and costs plus a 25% premium in the first year, or 50% in the second.
• 180 days for other land, with a premium of up to 25%.

You can't use the land during the redemption period, and the right to redeem can't be sold or signed over to someone else. If the tax sale brought in more than was owed, you can also claim the extra money within 2 years of the sale.

Back taxes on inherited land

Back taxes build up easily on inherited land. Bills keep going to someone who has died, or to one heir who assumes another is paying. If that's your situation, sort out who owns the land and what's owed at the same time. Our guide to selling inherited land in Texas walks through the title side.

If you'd like help, tell us about your land. We'll look up what's owed, talk through your options within 24 hours, and if we agree on a price, the taxes are paid at closing.