A tax foreclosure is the foreclosure of a home or commercial property for unpaid taxes. It often begins with a tax lien being levied from the local municipality against a homeowner. The lien is then sold at auction if left unpaid. At some point after the successful bidder buys the unpaid taxes at a tax sale auction, that investor tries to collect the unpaid taxes directly from the homeowner, plus interest. If the taxes go unpaid for a certain amount of time (and that time frame is different in each state) the investor can move to foreclose on the property.

If the property is successfully foreclosed, property ownership is conveyed to the investor who owns the tax lien.