Illinois Tax Sales

There are three types of Illinois tax sales, Annual, Forfeiture, and Scavenger.

Annual tax sales occur the year after the particular tax year is due. In example, the 2019 delinquent taxes become due and payable in 2020. If not paid in 2020, the 2019 taxes will be sold in 2021. After the annual taxes become delinquent, the county collector (treasurer) publishes an advertisement to give notice of the county collector’s application for an order of judgment and sale of delinquent taxes on various properties. 35 ILCS 200/21-110. The advertisement is published at least ten days before the date judgment is to be obtained. 35 ILCS 200/21-115. Not less than 15 days before the application, the county collector must mail notice to the tax assessee of each delinquent property by registered or certified mail. 35 ILCS 200/21-135. In all counties other than Cook, notice also must be mailed to any lienholder of record who requests such notice. 35 ILCS 200/21-135. Property owners may pay the delinquent taxes at any time on or before the business day immediately preceding the day the taxes are sold. 35 ILCS 200/21-165. The State’s Attorney for the county collector appears in court and presents the collector’s application for judgment and order of sale. After the court enters a judgment and order of sale directing that the delinquent properties be offered for sale.

The sale must begin within five business days after the judgment and order of sale is entered. 35 ILCS 200/21-115, 35 ILCS 200/21-150. Registration to purchase delinquent tax liens on properties at the tax sale must be completed according to the particular county collector’s rules and application requirements. The registered buyer may designate a bidder who will complete the buyer’s purchase. Once approved, the registered buyer bids at an annual sale that begins at 18% and goes all the way down to zero. In Cook County, and many other counties, the tax sale is electronic. Also in Cook County, and many other counties, large hedge funds buyers are forcing the bids to zero percent, meaning, the electronic selection process will automatically select the lowest percentage bid e.g. if 16 buyers bid zero percent, the electronic selection is randomized to promote fairness in distribution of successful bid counts, so long as the buyer’s collateral is sufficient. In another example, if buyer A submits a bid for 18% on the same property that buyer B submits a bid for zero percent, the delinquent taxes on the property will be sold to buyer B at zero percent—sold to the lowest percentage bid.

Forfeiture sales result when a property’s delinquent taxes are offered at the Annual Tax Sale and no one bids on the property. The unsold delinquent taxes on the property are then “forfeited.” 35 ILCS 200/21-225. Those desiring to purchase forfeited taxes “over the counter,” apply with the county clerk. The county clerk then sends notice to the tax assessee advising of the forfeiture application, and computes the amounts required to purchase the forfeited taxes including penalties and costs. The buyer must pay the entire amount of the taxes, costs, and penalties, and must pay all unpaid taxes and penalties for prior years in order to complete the purchase. The penalty rate is 12% per six months.

Scavenger sales occur every two years and include delinquent taxes for 3 or more years on a property. 35 ILCS 200/21-145. The next Scavenger sale will be in 2021 (they occur in odd numbered years). Distinct in Scavenger sales, the buyer is not required to pay the total amount of delinquent taxes due. Instead, the buyer bids the amount he or she desires to pay and a minimum bid is set by the county for the sale. The bids may proceed to increase if more than one buyer is interested in the property, and in some cases, may proceed and culminate into an amount over the amount of delinquent taxes due and penalties which is called an overbid. The overbid is not required to be paid back if the property owner redeems the delinquent taxes. The penalty on redemption from Scavenger sale is 12% per six months or fraction thereof for the first 24 months. Section 21-260 of the Property Tax Code sets forth the amounts of penalty and interest added to the Scavenger sale as follows:
(1) If redeemed within the first 2 months from the
date of the sale, 3% per month upon the amount of taxes, special assessments, penalties, interest, and costs due for each of the first 2 months, or fraction thereof.

(2) If redeemed at any time between 2 and 6 months
from the date of the sale, 12% of the amount of taxes, special assessments, penalties, interest, and costs due.

(3) If redeemed at any time between 6 and 12 months
from the date of the sale, 24% of the amount of taxes, special assessments, penalties, interest, and costs due.

(4) If redeemed at any time between 12 and 18 months
from the date of the sale, 36% of the amount of taxes, special assessments, penalties, interest, and costs due.

(5) If redeemed at any time between 18 and 24 months
from the date of the sale, 48% of the amount of taxes, special assessments, penalties, interest, and costs due.

(6) If redeemed after 24 months from the date of
sale, the 48% provided for the 24 months together with interest at 6% per annum thereafter on the amount of taxes, special assessments, penalties, interest, and costs due.

All of the above tax sales are prospective to individual, corporate, or hedge fund buyers. In addition to these types of tax sales, municipalities may purchase delinquent taxes when any property is delinquent for 2 or more years and is offered for sale under the provisions of the Property Tax Code. These tax sales are referred to as the no-cash bids because the municipality is not required to make any payment. The no-cash bid program is an economic development tool designed to assist municipalities and other taxing districts in acquiring tax delinquent property for reuse as private development and tax reactivation or for tax exempt municipal use. In addition, municipalities do not have to pay to file a petition for tax deed, but do have to pay the costs required to serve the mandatory notices as required by law.

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