Last Updated on September 9, 2025
When property owners fall behind on payments, there are two very different legal paths to repossess the home: tax foreclosure and mortgage foreclosure. Each process has its own rules, redemption periods and opportunities for investors. This guide answers common questions and compares the two types of foreclosures, drawing on lessons from our video and years of experience.
What is a tax foreclosure?
A tax foreclosure occurs when a property owner fails to pay property taxes. Local authorities place a lien against the property and issue a tax lien certificate, which can be sold to an investor. The purchaser pays the delinquent taxes and earns interest until the owner redeems the property. If the taxes aren’t paid within a statutory redemption period, the certificate holder can foreclose on the property. Every county has its own procedures, so investors must review county regulations before bidding.
What is a mortgage foreclosure?
A mortgage foreclosure is triggered when a homeowner defaults on their loan payments. Federal law generally requires loan servicers to wait 120 days of delinquency before starting foreclosure. The lender sends a notice of default and may file a judicial foreclosure lawsuit. If the borrower fails to cure the default, the property will be sold at auction. Depending on state law, foreclosures can be judicial or non‑judicial; judicial foreclosures go through court and often take longer.
How do redemption periods work?
Both tax and mortgage foreclosures usually include a redemption period—a legally designated window during which the owner can reclaim the property by paying all amounts owed. In property tax cases, owners can pay the delinquent tax plus interest and fees to redeem. Mortgage borrowers may redeem by paying the full mortgage debt before the sale or by reimbursing the purchaser after the sale, depending on state law. Redemption periods vary widely; some states allow redemption after a tax sale, while others don’t.
Tax foreclosure versus mortgage foreclosure – key differences
| Category | Tax Foreclosure | Mortgage Foreclosure |
| Trigger | Unpaid property taxes; county places a lien and may sell a tax lien certificate | Missed mortgage payments; lender must wait 120 days before filing |
| Parties involved | Local government and the investor who buys the lien certificate | Borrower and lender/servicer |
| Process | Investor pays taxes; owner can redeem. If not redeemed, investor petitions court to foreclose and gain title. | Lender files a judicial or non‑judicial foreclosure. Court may issue a default judgment if the borrower doesn’t respond |
| Redemption | Owner can pay delinquent taxes plus interest within a statutory period | Borrower can reinstate the loan within 120‑day delinquency and may redeem after sale in some states |
| Timeframe | Can span months or years depending on state laws; investor must wait through redemption period. | Servicer waits 120 days before filing; foreclosure can take months to years (judicial cases last longer) |
| Outcome | Investor may receive interest on taxes paid or acquire the property. Titles might need a quiet title action before resale. | Property is sold at auction; high bidder (often the lender) receives title and may evict occupants |
Do tax foreclosure disputes differ from mortgage disputes?
Yes. A mortgage foreclosure dispute is a disagreement between the homeowner and the lender. Many cases are resolved outside court through repayment plans, loan modifications or mediation. Non‑judicial foreclosures, common in about half the states, allow the lender to foreclose without filing a lawsuit. In contrast, a tax foreclosure dispute is between the homeowner and the county. Because public revenue is at stake, disputes often go through court, which means extra legal costs and time.
What happens after a mortgage foreclosure sale?
After the auction, the high bidder (often the lender) receives the deed. Occupants generally can stay in the home until the foreclosure is completed. If the borrower doesn’t leave voluntarily, the new owner must follow state eviction procedures. Some states allow a post‑sale redemption period during which the former owner can buy back the property.
Investor tips for buying tax and mortgage foreclosures
- Know your local rules: Each county sets its own auction dates, interest rates and redemption periods. Research statutes and contact the treasurer’s office before bidding.
- Understand the risks: Tax lien certificates are secured only by the property’s tax debt. You might not gain title if the owner redeems. Mortgage foreclosures may have senior liens or unpaid HOA fees that survive the sale.
- Check the property: Visit the property, review zoning and assess any environmental or structural issues. Investors sometimes acquire properties that need expensive repairs.
- Budget for legal costs: Quiet title actions, evictions and court filings can be costly. Factor attorney fees into your investment calculations.
- Leverage free resources: Start with our ABCs of Tax Lien & Deed Investing mini‑course to understand the basics. Then read our guide on Understanding a Tax Deed for an overview of tax deed investing and our article on Top 5 Tax Lien Mistakes to Avoid to learn common pitfalls.
Frequently asked questions
You won’t face foreclosure right away. Federal law requires servicers to wait until you’re 120 days delinquent before starting foreclosure.
In many states, yes. During the redemption period you can pay the delinquent taxes, interest and fees to reclaim the property. Some states have no post‑sale redemption for tax deeds, so check local rules.
It varies by jurisdiction. Some counties allow six months or even two years for tax lien redemptions, while others provide only a few months for mortgage foreclosures.
Yes. Judicial foreclosures go through the court system, with hearings and paperwork that can extend the process by months or years. Non‑judicial foreclosures usually involve notices of default and sale without court involvement, so they finish sooner.
Conclusion and next steps
Understanding the distinction between tax foreclosure and mortgage foreclosure is essential for investors and homeowners. Tax foreclosures revolve around unpaid property taxes and give investors a chance to earn interest or acquire property, while mortgage foreclosures stem from missed loan payments and follow a more structured timeline. Both processes offer redemption opportunities, but the timelines and legal procedures differ. Before you bid on a tax lien or mortgage foreclosure, research the rules in your county and talk to a qualified real‑estate attorney or advisor.Ready to learn more? Download our free mini‑course for a step‑by‑step introduction to tax lien and deed investing and book a free strategy call to discuss your goals. For further reading, explore our detailed article on Understanding a Tax Deed and our guide on Top 5 Tax Lien Mistakes to Avoid, which are linked above. With knowledge and careful planning, you can navigate the world of foreclosures confidently and ethically.
