Nebraska
How It Works
Nebraska counties sell tax liens on delinquent properties to investors. After three years have passed from the date of sale, an investor can apply to the treasurer for a deed and full title to the property. The investor keeps the profits of any subsequent sale (or windfall from retaining the property).
However, when no investor purchases a lien, the county must foreclose on the property through the court. A court-ordered sale protects the debtor’s equity, requiring surplus funds to go to the former owner. Investors who purchase tax liens also have the option of using judicial foreclosure.
The Impact
Homeowners caught up in this process lose, on average, 86% of their equity. For the 300 homes in our dataset, homeowners lost a total of $17 million.
Why It Matters
In Nebraska:
- 99% of homes were forcibly seized for tax debts less than the price of a 10-year-old Chevy Silverado.
- On average, homeowners were forced to pay out at 45 to 1 odds on the original tax debts owed.
- Investors were able to keep $11 million more than what was owed to them.
Kevin Fair and his wife, Terry, owned a modest home in Scottsbluff, Nebraska.
Terry was fired from her longtime job when multiple sclerosis made it difficult for her to perform her normal job duties. And as her health deteriorated further, Kevin had to retire early to care for her. The Fairs became financially constrained and fell behind on their 2014 property taxes.
When property taxes are not paid in Nebraska, the county sells an automatically created tax lien—a legal claim on the property—to a third party. After a three-year redemption period, the lien owner can either apply for a tax deed for the property with the treasurer or auction the property.
Consistent with this legal framework, Scotts Bluff County imposed a tax lien on Kevin and Terry’s property in 2014. Then, in March 2015, the county sold this lien to Continental Resources for the total the Fairs owed: $588. The company then quietly paid the subsequent taxes on the Fairs’ house. As a result, the county stopped sending tax notices to the Fairs.
Three years later, in April 2018, Continental notified the Fairs that they had three months to redeem their property at a cost of $5,268. This cost included the initial $588, subsequent taxes, fees, and 14% annual interest.
The Fairs tried to get a bank loan to pay off the lien but were unsuccessful. As a result, Continental was able to obtain a tax deed for the couple’s home—then valued at approximately $60,000—in July 2018.
Continental then filed a “clear title” lawsuit asking a court to hold that it was the property’s rightful owner.
The Fairs filed a countersuit alleging that Scotts Bluff’s tax certificate sale process violated the Takings Clause of the U.S. Constitution. However, the district court ruled against them and granted the property’s title to Continental.
To add salt to the wound, Terry passed away before the district court ruling, leaving Kevin to mourn the loss of both his wife and their home, where they had lived together for nearly three decades. Meanwhile, Kevin continued to face tremendous financial stress due to his medical bills. He was forced to even sell his car.
Despite this, Kevin did not give up. He continued his fight with an appeal.
But on March 18, 2022, the Nebraska Supreme Court ruled against Kevin. In other words, the court held that neither the Nebraska nor U.S. Constitutions prevent the government from giving Kevin’s $60,000 house to an investor as payment for a $5,200 debt.
As bad as Kevin and Terry’s experience was, they are just two of hundreds of other Nebraskans who have lost their homes due to Nebraska’s predatory property tax foreclosure system. Pacific Legal Foundation’s research found that, from 2014 through 2021, Nebraska county governments seized and sold about 300 homes in the seven counties studied. Homeowners’ lost savings amounted to an average of 86% of their homes’ value.
The Nebraska Legislature can act now to restore homeowners’ property rights by following other states’ models and allowing homeowners to reclaim their equity after tax foreclosures, without harming the ability of counties to sell tax liens.
Resources
End Home Equity Theft Model Policy
Download data
Maine should end the practice of home equity theft
State Summaries
Legal Appendix
Nebraska Home Equity Theft Laws
Does the law commonly protect owners’ equity?
- Analysis
-
June 2023 update: Thanks to PLF’s legislative policy efforts, Nebraska law now protects equity in tax foreclosures. Where a property’s expected equity is more than $25,000, all foreclosures must go through a judicial proceeding and sale, with the surplus proceeds going to the former owner. Where the expected equity is less than $25,000, and the lienholder obtains a treasurer’s deed to the property, the lienholder must pay the former owner for any equity.
- Citation
-
Neb. Stat. 77-1838; 77-1902.
Are there any exceptions to that rule?
- Analysis
-
Yes. Nebraska also has a judicial foreclosure system that is used when no one purchases a tax lien. In that case, the county would proceed with a judicial foreclosure and sale, with surplus proceeds treated as if they were in a mortgage foreclosure proceeding (i.e., retained for the former owner). Even private lienholders may choose to utilize this judicial proceeding rather than the administrative tax deed procedure, although they are unlikely to do so in practice.
- Citation
-
Neb. Rev. Stat. §§ 77-1901, -1902, -1916; 25-2146.
Does the government sell tax liens, or does it sell property outright, and what procedures does it use for the sale?
- Analysis
-
The government sells tax liens for a price fixed at the amount of the debt using round-robin bidding procedures. In cases where the tax lien is unpurchased, the government proceeds with a judicial foreclosure and sale of the property in the manner of a mortgage foreclosure sale.
- Citation
-
Neb. Rev. Stat. §§ 77-1807(2)(c), (e), -1901, -1911, -1916.
What interest and penalties accrue for delinquent taxes, and who collects them?
- Analysis
-
Interest on delinquent taxes accrues at 14% annually. Before a tax lien sale, this interest is collected by the taxing district for distribution to government agencies in the same proportion as the principal taxes. After an investor pays this interest to the government to purchase the lien, the investor then collects interest from the taxpayer.
- Citation
-
Neb. Rev. Stat. §§ 77-1718, 45-104.01.
What is the redemption period—the length of time to pay the debt prior to permanently losing title?
- Analysis
-
Redemption is available at any point until the lienholder files an application for a tax deed with the county treasurer. Such an application cannot be made until three years have passed since the date of the tax lien sale.
- Citation
-
Neb. Rev. Stat. §§ 77-1824, -1837(1).
If equity is stolen, who profits?
- Analysis
-
Private investors keep the equity. There are no post-foreclosure sale requirements.
- Citation
-
Neb. Rev. Stat. § 77-1838.
How much time does the previous owner have to claim the surplus proceeds, and what are the procedures for claiming them?
- Analysis
-
June 2023 update: The previous owner does not bear the burden of claiming proceeds. Instead, equity is distributed either by judicial proceeding or by direct reimbursement from the lienholder.
- Citation
-
Neb. Stat. 77-1838; 77-1902.
What types of foreclosures are used in the state?
- Analysis
-
It depends on the property’s expected equity (calculated based on its assessed value for taxation). If it is less than $25,000, the lienholder may apply for administrative foreclosure. If it is more than $25,000, judicial foreclosure must be used.
- Citation
-
Neb. Stat. 77-1838.
What types of notice does the state require?
- Analysis
-
(1) Notice for all delinquent properties subject to sale, and (2) notice before applying for a treasurer’s deed.
- Citation
-
Neb. Rev. Stat. §§ 77-1802, -1803, -1831, -1832.