Property Tax Debt and Home Sales: What Sellers Need to Know

Many homeowners approaching retirement find themselves in an unexpected bind: they've maintained a spotless payment record on their mortgage, yet they've fallen behind on property taxes. For those considering selling their home, this situation raises urgent questions about timing, financial consequences, and whether now is the right moment to put the house on the market.

Property tax delinquency in California carries real financial and legal consequences that can complicate a home sale. The state's tax system operates on strict deadlines, and missing them triggers a cascade of penalties that accumulate over time. Understanding these rules is essential for anyone in this position.

Background

California divides property taxes into two installments each fiscal year, with very specific due dates. The first installment is due November 1, and the second is due February 1. These are not suggestions—they are legal deadlines with immediate financial consequences for those who miss them.

The delinquency process works like this: if the first installment is not paid by December 10, it becomes delinquent. If the second installment is not paid by April 10, it also becomes delinquent. Once a payment misses these deadlines, a 10 percent penalty automatically attaches to the unpaid amount. Beyond the initial penalty, additional fees and interest charges begin accumulating.

The stakes grow significantly higher if taxes remain unpaid for an extended period. Under California law, property on which taxes remain unpaid at 12:01 a.m. on July 1 becomes what is known as "tax-defaulted" land. Once a property reaches this status, the county tax collector gains the authority to sell that property at public auction to recover the owed taxes—but only after five years of delinquency have passed.

This five-year window is critical. It represents a redemption period during which a homeowner can still pay off the delinquent amounts and prevent a tax sale from occurring. However, once that five-year period expires, the county can move forward with selling the property without the owner's consent.

Key Details

How Penalties Accumulate

The 10 percent penalty that attaches upon delinquency is just the beginning. If taxes remain unpaid beyond June 30, they enter a more serious delinquent status with a 1.5 percent monthly penalty—equivalent to 18 percent annually—that continues to accrue until the debt is paid. This means the longer someone waits, the more they owe.

For example, a property owner who misses the April 10 deadline for the second installment faces the initial 10 percent penalty plus administrative fees. If the taxes are not paid by June 30, the monthly penalty kicks in, and the total debt grows every 30 days.

The Tax Lien and Property Sales

When property taxes go unpaid, the taxing authority places a lien on the property. This lien makes the property act as collateral for the debt. For someone trying to sell their home, a tax lien creates a serious obstacle. Most buyers and their lenders will not proceed with a purchase if a tax lien exists on the property. The lien must be resolved before the sale can close.

Resolving the lien means paying off the delinquent taxes, penalties, and accumulated interest. This payment obligation falls on the current owner and must be satisfied before the property can legally change hands. For sellers who are short on cash, this requirement can derail a sale entirely or force them to accept a lower offer to cover the tax debt.

Recent Relief Measures

California has recently implemented temporary relief for property owners in specific areas affected by disasters. Governor Newsom's Executive Order N-10-25, issued in January 2025, suspended certain property tax penalties and collection efforts through April 10, 2026, for affected properties in Los Angeles and Ventura counties. However, this relief does not apply to any taxes that were already delinquent as of January 6, 2025, or to properties where taxes are paid through impound accounts.

This relief is temporary and geographically limited. It does not represent a permanent change to how California handles delinquent property taxes, and it does not apply to most homeowners outside the affected disaster areas.

What This Means

For someone approaching retirement and considering a home sale, delinquent property taxes represent a significant financial liability that must be addressed before closing a deal. The penalties and interest charges mean that the longer the debt goes unpaid, the more expensive it becomes to resolve.

"Missing either deadline results in immediate penalties—often 10 percent of the unpaid amount, plus additional costs and accumulating interest, which can make repayment increasingly challenging," according to information about California's tax system.

A homeowner in this situation has several options. The most straightforward approach is to pay the delinquent amount immediately, including all penalties and accumulated interest. This clears the tax lien and allows the sale to proceed. If cash is tight, the homeowner could negotiate with a buyer to have the buyer pay off the tax debt as part of the closing process, though this typically requires a significant price reduction to compensate the buyer for taking on this obligation.

Another option is to wait and continue making current tax payments while working to pay down the delinquent amount. However, this approach delays the home sale and allows penalties and interest to continue accumulating.

For homeowners who are not yet five years into delinquency, the redemption period provides a safety net. As long as they pay off the debt before the five-year mark passes, they retain ownership of their home. Missing that deadline, however, means the county can auction the property without the owner's permission.

The timing of a home sale when property taxes are delinquent depends on the homeowner's financial situation and how far behind they are on payments. Someone with the means to pay off the debt quickly might proceed with selling relatively soon. Someone without immediate access to the funds needed to clear the tax lien may need to delay the sale until the debt is resolved.