What Happens to Property Taxes During Foreclosure

1. Property Taxes and Foreclosure Basics

Every California homeowner owes annual property taxes based on assessed value (Cal. Rev. & Tax Code § 2187). Even if you stop paying your mortgage, property taxes continue to accrue until the home is sold or redeemed. If your loan has an escrow account, your lender pays taxes from it. But if you’re behind on payments, that account may already be depleted—meaning the taxes go unpaid and penalties start building.

2. Who Pays Property Taxes During Foreclosure?

During foreclosure:

• If your loan includes escrow, the lender or servicer may keep paying taxes to protect its lien position.
• If you pay taxes directly, you remain responsible until the property changes ownership.
• Once the foreclosure sale occurs, the new owner (bank or buyer) becomes responsible for future property tax bills.

Unpaid taxes that accrued before the sale are settled through the foreclosure proceeds—tax liens are paid first, before mortgage debt or junior liens (Cal. Rev. & Tax Code § 3712).

3. What If You Still Owe Back Taxes?

If the foreclosure sale doesn’t generate enough funds to cover all property taxes, you won’t personally owe the remaining balance in most cases. California’s anti-deficiency laws (Cal. Code Civ. Proc. § 580b) prevent lenders from pursuing you for mortgage-related shortfalls. However, if you owned the property free and clear (no mortgage), unpaid property taxes could trigger a tax-default sale after five years (Cal. Rev. & Tax Code § 3691).

4. Refunds and Adjustments After Sale

Once the sale is completed:

• The trustee or new owner pays any outstanding taxes from sale proceeds.
• The county tax collector updates records to reflect the new ownership.
• If you overpaid taxes through escrow or duplicate payments, you can request a refund from your county treasurer.

To verify final status, contact your County Tax Collector’s Office with the parcel number and sale date.

5. How to Protect Yourself

• Check your property tax account online regularly through your county assessor’s site.
• Confirm escrow activity—ask your servicer whether taxes are still being paid.
• Avoid paying taxes twice—never send funds to anyone other than the county tax collector.
• Keep receipts—property tax records are critical if you later claim surplus funds or dispute foreclosure fees.

Even in foreclosure, property taxes don’t pause. Staying informed ensures that you don’t face unnecessary penalties—or miss money that’s rightfully yours after the sale.