PSI New Jersey Real Estate State Practice Exam

What is a common consequence of a homeowner failing to pay property taxes?

1. Filing for bankruptcy

2. Levy against income tax refunds

3. Liens placed on the property

4. Reduction in property value

The correct answer is: Liens placed on the property

When a homeowner fails to pay property taxes, one of the most immediate and significant consequences is the placement of a lien on the property. A property tax lien gives the local government a legal claim against the property until the delinquent taxes are paid in full. This process ensures that the government has recourse to recover unpaid taxes. The establishment of a lien means that the government will have priority over other creditors in the event of a sale or foreclosure of the property. It protects the government’s interest and serves as a potential obstacle for the homeowner, as they cannot sell or refinance the property without addressing the outstanding tax obligation. Therefore, the creation of a tax lien is a crucial mechanism that local governments use to enforce tax collection and secure the revenue needed for community services and maintenance.