Delinquent tax sales are one of the most common yet misunderstand tools, used by local authorities to ensure that everyone pays their property taxes. The way it usually works is you forget to pay your taxes (life happens), and you get a notice in the mail saying you are late and your property will be sold 6 months from now if you do not pay.

If you still do not pay, you will get follow-up letters and eventually they will post a bright orange sign on your property stating their intention to sell it at the tax auction.

South Carolina delinquent tax auctions are unique given that each county has one a year they can sell a lot of properties within a day. While the number of properties has been dropping in recent years after the economic recovery, roughly 500 properties went to sale in 2017, down from up to 1500 during the Great Recession.

But it doesn’t stop there. Unlike foreclosure auctions where once it’s auctioned off the property transfers ownership, the tax sale is much more forgiving. If you miss all the notices and your property is sold, you still have a year to pay your back taxes, next year’s taxes, plus fees and interest on the sale price. So you have a one year redemption period.

Why are you charged interest? The investors who participate in the auction are largely looking to make a return via interest. This return can be up to 12% which is charged at 3% every 3 months for the year (pro-tip: pay it back within the first 3 months to minimize your cost), however the law caps the interest to be no more than the taxes owed.

Example:

Martha owes $1,000 in taxes. Due to a hospitalization, she misses her tax payments and the property goes to auction where it sells for $100,000. When Martha goes to pay she owes:

$1,000 for back taxes

$1,000 for this years taxes

$250 assorted auction fees

$1,000 in interest

This brings her redemption cost to a total of $3,250. Only $1,250 of that is due to the auction and the rest is what she would have paid in taxes anyway. If she pays at the end of the redemption period, the investor only gets $1,000 in interest or 1% because it is capped at what she owes in taxes. In the past, the 12% might have cost her an additional  $12,000 in interest, which could cause her to lose the property. The law now is such to incentivize owners to pay their taxes on time, but not so harsh as to cause the owners to lose their property.

What do you do if your property is sold?

The best thing you can do is come up with a plan. Most people’s plan is that they don’t have a plan and “what happens will happen.” Faith is important, but driving without your hands on the wheel and your eyes on the road is not a good way to drive through life.

A plan should include:

1. How to pay back taxes and redeem the property with the next year, either through a sale or borrowing/saving money
   
2. How to lower your tax bill so that in the future, you don’t have to pay as much. This does not apply to past years’ taxes, but
   
3. What your long term goals with the property are. This is arguably the most important and the  most difficult as it can mean either letting go of a property (possibly an inherited family property with sentimental value) or committing to the property (which includes many future years of taxes, maintenance, and insurance), neither of which are easy tasks. Please read our article titled Your Property Plan to get a deeper understanding of the pros and cons of each.

Contrary to popular belief, the government is not out for your property. Having worked closely with the Charleston County Delinquent Tax Office for years, we can say that they are a hard-working group who care and want  you to succeed! Unfortunately, they are tasked with collecting back taxes by the rulebook, but they work hard to help homeowners understand their options and reach their goals. Please call them at 843-202-6570 with any questions or concerns you may have.

If you have any questions about a Property Plan or possibly selling your property, feel free to contact us. Also check out our articles to learn more about taxes and the pitfalls of owning property so that you can avoid them. We live to serve!

***SCpropertyhelp is not an attorney and this should not be construed as legal advice. We do our best to serve others and to be factually accurate so please let us know if you notice any inaccuracies***