When you are facing foreclosure in Florida, property taxes may not be the first thing on your mind — but they should be. Property taxes interact with the foreclosure process in important ways, and understanding how they work can affect your decisions about whether to fight for your home, sell, or let the foreclosure proceed.
This guide explains what happens to your property tax bill during foreclosure, how tax liens relate to your mortgage, and what you need to know about your homestead exemption.
Do You Still Owe Property Taxes During Foreclosure?
Yes. As long as you are the legal owner of the property, you are responsible for property taxes. The foreclosure lawsuit does not suspend your tax obligation. Taxes continue to accrue from January 1 through December 31 each year, and the bill is sent in November for the current tax year.
If your mortgage includes an escrow account (most do), property taxes are typically paid from the escrow fund. Even if you stop making mortgage payments, the lender may continue to advance funds from escrow to pay the taxes — and add those advances to your total loan balance. This is because the lender has a strong interest in keeping property taxes current to protect their lien position.
If you pay property taxes directly (no escrow), you are responsible for making those payments on your own. Missing property tax payments during foreclosure adds another financial problem on top of the mortgage default.
How Does Property Tax Lien Priority Work in Florida?
In Florida, property tax liens have super-priority status. This means that a property tax lien takes precedence over virtually all other liens on the property, including:
- First mortgages
- Second mortgages and home equity lines
- HOA and condo association liens
- Judgment liens
- Mechanic's liens
This super-priority status means that when a property is sold — whether at a foreclosure auction or through a regular sale — property taxes must be paid first before any other lienholder receives funds. For homeowners, this means that unpaid taxes reduce the amount available to pay the mortgage and other debts from a sale.
What Happens to Property Taxes at the Foreclosure Auction?
At a Florida foreclosure auction, the sale proceeds are distributed in a specific order. Property tax liens are satisfied first due to their super-priority status. The remaining proceeds go to the foreclosing lender to satisfy the mortgage judgment.
If the lender takes the property back as REO (no third-party bid at auction), the lender becomes responsible for paying any delinquent property taxes. Lenders typically pay delinquent taxes promptly after acquiring the property to avoid the tax certificate process.
If a third party purchases the property at auction, they acquire it subject to any unpaid taxes. Most savvy auction buyers account for delinquent taxes in their bid calculations.
Tax Certificates and Tax Deed Sales
When property taxes go unpaid in Florida, the county tax collector sells a tax certificate on the property. This is different from foreclosure — it is a separate process governed by Florida Statute Chapter 197.
Here is how the tax certificate process works:
- Tax certificate sale — The county sells a tax certificate to an investor who pays the delinquent taxes. The certificate earns interest (up to 18% annually) that the property owner must pay to redeem.
- Two-year waiting period — The certificate holder must wait at least two years before applying for a tax deed.
- Tax deed application — After two years, the certificate holder can apply for a tax deed, which initiates a process to sell the property at a separate public auction.
- Tax deed sale — If the owner does not redeem the certificate (pay the delinquent taxes plus interest and costs), the property is sold at a tax deed auction. The sale wipes out most other liens, including the mortgage.
Tax deed sales are relatively rare for properties already in mortgage foreclosure because the mortgage lender usually pays the delinquent taxes to protect its position. However, if the lender is slow to act — or if the property has been abandoned — a tax deed sale can happen.
Your Homestead Exemption During Foreclosure
Florida's homestead exemption provides a $50,000 reduction in assessed value for property tax purposes (the first $25,000 applies to all taxes; the second $25,000 applies to non-school taxes for properties valued over $50,000). The homestead exemption remains in effect during foreclosure as long as the property is your primary residence.
Important points about the homestead exemption during foreclosure:
- Continue to maintain the property as your primary residence to preserve the exemption
- File any annual renewal or application required by your county property appraiser
- If you move out before the foreclosure sale, you may lose the exemption, which would increase the property tax bill
- The exemption transfers to the new owner's qualification status after the sale
Rising Property Taxes as a Foreclosure Trigger
Barrett Henry, a REALTOR with 23+ years of real estate experience and Broker Associate at REMAX Collective, has seen a growing number of Florida homeowners pushed into financial difficulty by rising property taxes. When property values increase, tax assessments follow — and the resulting escrow adjustments can increase your monthly mortgage payment by hundreds of dollars.
Combined with rising insurance costs, the total monthly payment increase can make a previously affordable mortgage unmanageable. If rising property taxes are contributing to your financial hardship, this is important documentation for a loan modification application.
You should also check whether your property has been properly assessed. Florida law allows homeowners to challenge their property tax assessment through the Value Adjustment Board (VAB) process. If your property is over-assessed, a successful challenge can reduce your annual tax bill.
What to Do About Property Taxes During Foreclosure
- Check your escrow account — Contact your mortgage servicer to find out if taxes are being paid from escrow. If so, the lender is likely keeping taxes current.
- Check for tax certificates — Contact your county tax collector to see if any tax certificates have been sold on your property.
- Maintain your homestead exemption — Keep the property as your primary residence and file any required renewal applications.
- Factor taxes into your decision — When evaluating whether to sell before the auction or pursue another option, include delinquent taxes in your total debt calculation.
Have questions about property taxes and foreclosure? Contact us today for a free consultation — no cost, no obligation.