Imagine one day reaching a milestone and realizing an accomplishment that so many of your brothers and sisters have failed to achieve in the past: home ownership.
For many Americans, it’s the American dream. Imagine not only buying a home and putting down a down payment with a 30-year mortgage, but actually one day owning your home free and clear.
In other words, your home is paid off; no mortgage, no bank, no finance company, no-nobody, but you. Hallelujah! Free at last, the American dream! In your heart and soul, you feel you’ve insured as well as secured yourself from the thought of ever one day becoming homeless in America. What an accomplishment!
Now imagine losing it, and not because you didn’t pay the mortgage.
Although you’ve achieved the so-called American dream, let me share with you some truths that often turn your dream into a nightmare, especially for African-Americans.
You see, in America, even though you somehow manage to pay off your mortgage, the truth is, you’ll never own your home and be free from added taxes. You might pay the mortgage off, but you never stop paying property tax on it. That’s right. And guess what? If you don’t pay your property taxes, the government has the right to take your home from you, and it’s all legal.
Every year African-Americans lose millions of dollars in real estate simply by not paying their property taxes. From farmland to commercial property to multi-family units right down to personal residences. This has got to stop.
The current recession has only added to this growing nightmare. Personally, I’ve never liked the idea of paying property taxes each and every year on your personal residence, especially after you’ve satisfied the mortgage debt and are living on a fixed income from retirement and social security. It’s really a bad deal for the homeowner. It’s not fair. Case and point: when you buy growth stocks like Apple and hold them, as they appreciate over the years you don’t pay a dime in taxes until you sell. Same rule applies to cash value life insurance policies — no taxes, as rich people continue to stash millions of dollars in them. The same rule should apply for residential property.
Could it be that assets such as stocks, bonds and insurance get special tax treatment because African-Americans aren’t known for using and taking advantage of these wealth building investment vehicles?
Did you know that when figuring your net worth, your personal residence isn’t used in the computation? It’s your home, not an investment. It doesn’t matter if it’s paid off or not, it’s not an investment and you will never stop paying for it.
Recently, a 101-year-old, African-American woman lost her home because she failed to pay her property taxes. Sad, but it still happened. It should serve as a wake-up call to the rest of us that age doesn’t matter when you’re talking business and money.
So how can we avoid this happening to the rest of us in the future?
First, pay your taxes. If you find yourself behind for several years, and you can’t afford to pay all the years at once, pay the oldest tax bill first. This will buy you some time for at least another year. Paying the oldest bill first will keep the property taxing authority from foreclosing on you property now.
The rule is, if you’re behind one or two years paying your property taxes, they won’t foreclose. But if you manage to fall behind after the third year, you’re living on borrowed time. Investors are circling your property like vultures waiting to scoop it up after that third year.
You see, when you fail to pay your property taxes, investors pay them for you. Yes, that’s right. A complete stranger pays your tax bill. It’s called purchasing a tax certificate. Now don’t get me wrong, this investor could be an individual or a corporation. In the case of the 101-year-old woman it was a governmental agency.
The investor is in it for a profit — nothing personal. Paying other people’s property taxes (purchasing tax certificates) is a very profitable business. Tax certificates can pay anywhere from 5 percent to as much as 18 percent on the dollar.
If you think it’s shocking to hear that a 101-year-old woman lost her home due to delinquent taxes, be advised, it can happen to anyone. People lose homes not just due to property taxes, but African-Americans also lose millions of dollars worth of property each year because they simply failed to have a will or a trust drawn up before they died.
In the end, it’s all about the money. We need to be educated to do better about protecting the assets we have worked so hard for.
Robert Henderson Jr. is a certified financial planner, president of the Henderson Financial Group, author of “The New Underground Railroad” and a talk radio host based in Miami, Florida.