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When a property owner fails to pay taxes on real estate in this state, the property may be sold in one of three ways:
- At an annual tax sale
- At a forfeiture sale
- At a scavenger sale
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Annual sale. If the taxes on a property have not been paid by the due date of the second installment, the county collector can enforce the tax lien and request that the circuit court order a tax sale. Notification requirements include publication in a newspaper of general circulation within the community and a certified or registered mailing to the last known address of the taxpayer. The court will render judgement in favor of the county if the taxes are shown to be delinquent and proper notice has been given. The court allows only the sale of the tax lien, not the property itself.
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Prior to the time of sale, the owner and any other party with a legal interest (except undisclosed beneficiaries of a land trust) may redeem the property and stop the sale by paying the delinquent taxes, applicable interest, and publication costs. Successful purchasers are those who offer to pay all outstanding taxes, interest, publication costs, processing charges and the county treasurer’s indemnity fund fee.
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If competitive bidding results, the bid is for the lowest rate of interest that will be accepted by the bidder in case of redemption during the first six months of the redemption period. The only persons not allowed to bid at the sale are owners, persons with legal interest and/or their agents. Upon payment (certified funds, cash, cashiers check) the purchaser receives a certificate of purchase. This certificate will ripen into a tax deed if no redemption is made within the statutory period.
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The statutory time period allowed for redemption on most property is two years after the sale. Properties with six or fewer units where the owner resides must be redeemed within 2.5 years of the sale. If the property is not redeemed by the owner within the prescribed period, the tax purchaser is required to give notice to the delinquent owner and other parties who hold any interest in the property before applying for a tax deed. The tax deed must be recorded within one year after the expiration of the redemption period or it becomes null and void.
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Forfeiture sale. If there are no bids on a property at the annual tax sale, the property is forfeited to the state, although title does not change. The owner still may redeem the property after forfeiture by paying delinquencies plus the other charges described above. Anyone who wants to purchase the property for the outstanding taxes may make application to the county. If the owner does not claim the property within 30 days of notification, the applicant will be issued a certificate of purchase once they have paid the outstanding taxes plus other charges on the property. If redemption is later made by the original owner, the certificate holder must be compensated based on 12% interest on each six months the certificate was held.
Scavenger sale. If the taxes have not been paid on a property for two years or more, the property may be sold at a scavenger sale . The county must go through the same court process as it would for tax sales and receive an order of sale. The successful bidder at these sales is the one who is willing to pay the highest cash price for the property. The buyer is not required to pay the tax lien but must pay current taxes. In this case, the former owners may not bid on their delinquent properties. Redemption rights apply. However, the redemption period for vacant nonfarm real estate, commercial or industrial property, or property improves with seven or more residential units is only six months. For redemption to occur, all past-due taxes plus interest and penalties must be paid by the redeemer. In addition, the owner of the certificate of purchase must be paid back the bid price plus interest.
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Note: Geography affects which approach is emphasized. Cook County generally holds scavenger sales. Other counties redeem the properties and then sell them to return them to the tax rolls.
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