How Do Tax Foreclosures Work in Virginia Beach?

Tax foreclosures in Virginia Beach begin when real estate taxes remain delinquent past December 31 following the second anniversary of their original due date, a timeline fixed by Virginia Code § 58.1-3965. Even after the city files suit, you can keep your home by entering a payment agreement of up to 72 months with the Treasurer’s Office or by redeeming the property in full any time before the sale date.¹

When the City Can Start Foreclosure

The standard rule gives you a window of roughly two and a half years. If your first-half 2023 taxes went unpaid, the second anniversary falls in 2025, and the city can begin proceedings after December 31, 2025.¹

That window shrinks for problem properties. If a structure has been condemned, declared a nuisance, classified as a derelict building, or officially designated as blighted, the waiting period drops to the first anniversary of the tax due date. The shorter timeline reflects the city’s interest in moving fast on properties that drag down surrounding neighborhoods or pose safety hazards.¹

The Notice You Should Receive First

Before filing in court, the tax-collecting officer must send written notice at least 30 days ahead. The notice goes to your last known address in the treasurer’s records and, if different, to the property address itself when it has a numbered street address on file with the post office. Critically, the letter must tell you that you can request a payment agreement with the treasurer.¹

The city also publishes a list of properties headed for sale in a local newspaper at least 30 days before proceedings begin. If your mailing address with the treasurer is outdated, the letter may never reach you. Keeping your contact information current with the Virginia Beach Treasurer’s Office is one of the cheapest forms of insurance available.¹

Payment Agreements to Keep Your Home

The pre-suit notice must inform you of the right to request a payment agreement covering delinquent taxes, interest, and penalties over a period of up to 72 months. Six years of installments can make an otherwise unmanageable lump sum workable for a homeowner in financial distress.¹

The Virginia Beach Treasurer’s Office administers delinquent real estate taxes under separate policies from accounts like personal property or business taxes. The city’s delinquent collections page notes that real estate taxes “have their own policies and procedures,” so contact the Treasurer’s Office directly for available terms and the documentation you’ll need to submit.²

What Delinquent Taxes Actually Cost

Virginia law caps the penalty for unpaid real estate taxes at 10 percent of the past-due amount. Interest begins accruing as early as the day after the taxes are due, at a rate set by the local governing body but capped at 10 percent per year. For the second and later years of delinquency, the locality can charge the higher of 10 percent or the federal underpayment rate under Internal Revenue Code § 6621.³

These charges compound quickly. By the time the city files suit two or more years after the original due date, the balance can be half again what you started with, before you add court costs and attorney fees that get tacked on once the lawsuit begins.

Redeeming the Property Before the Sale

Even after the suit is filed, you can stop the foreclosure by redeeming the property any time before the date set for the judicial sale. This right isn’t limited to the title holder. Heirs, successors, and anyone who has acquired an interest in the property can redeem it.⁴

Redemption means paying into court the full amount of delinquent taxes, penalties, and interest, including any amounts owed to a concurrent taxing entity like a town. You also have to cover all costs of the proceedings, including publication costs and a reasonable attorney fee set by the court. Partial payment doesn’t count. The statute is explicit: paying part of what you owe will not suspend, invalidate, or moot the foreclosure action.¹

For an exact payoff figure, contact the Treasurer’s Office or the court-appointed Special Commissioner and provide the parcel identification number or street address. The total changes daily as interest accrues, so request the calculation as close to your payment date as possible.

If the Property Goes to Sale

When no one redeems, the Circuit Court moves toward a sale. The court can appoint one or more special commissioners to conduct it, directing whether the sale will be for cash or on credit terms the court deems appropriate. Public advertising in local newspapers typically runs for several consecutive weeks, describing the property, auction time, location, and bidding terms. The sale isn’t final until the judge issues a decree of confirmation, verifying the process was fair and the price adequate.⁵

Sale proceeds follow a strict priority. Costs of the sale come off the top first, then delinquent taxes, penalties, interest, and fees owed to Virginia Beach. If the property sits within an incorporated town that also levies real estate taxes, that town’s share is satisfied next. The court then determines the priority of remaining creditors such as mortgage lenders and judgment holders, and orders payment in their established order of priority. Anything left over belongs to the former owner and is held by the treasurer in an interest-bearing escrow account, subject to claims of other creditors.⁶

Don’t assume surplus funds will find you automatically. If you lose property to a tax sale and believe the sale price exceeded what was owed, contact the Treasurer’s Office to file a petition for excess proceeds.

Federal Tax Consequences After the Sale

Losing property to a tax sale can trigger federal income tax obligations that catch former owners off guard. The IRS generally treats canceled debt as taxable ordinary income. If the total debt against the property exceeded the sale price and part of that debt was forgiven or discharged, the forgiven amount may need to be reported on your federal return. Watch your mailbox for Form 1099-C.⁷

If you receive surplus proceeds, the transaction also has capital gains implications. The IRS treats the difference between the amount realized from the disposition and your adjusted basis in the property as a capital gain or loss. For most taxpayers, net long-term capital gains are taxed at 0, 15, or 20 percent depending on total taxable income. Losses on personal-use property like your home are not deductible.⁸

A tax professional can tell you whether any exclusions apply and how to report both the property disposition and any canceled debt correctly.

Buying Property at a Virginia Beach Tax Auction

Tax foreclosure auctions attract investors looking for below-market deals, but they carry risks a conventional purchase does not. The court issues a judicial deed to the successful bidder after confirmation, which generally provides strong title because the court has supervised the process and verified that required notices were served. Title defects can still surface, however, if notice to an interested party was legally insufficient.

Most title insurance companies treat judicially sold properties with extra caution. Some impose waiting periods before issuing a standard policy; others may exclude specific risks tied to the prior foreclosure. Before bidding, research the title history, visit the site in person to check for occupants or physical problems, and confirm any outstanding liens that might survive the sale. Properties coming out of tax foreclosure often have deferred maintenance, code violations, or environmental issues that the sale price alone does not reflect.

1
Virginia Code Commission. Virginia Code 58.1-3965 – When Land May Be Sold for Delinquent Taxes; Notice of Sale; Owner’s Right of Redemption
2
City of Virginia Beach. Delinquent Collections
3
Virginia Code Commission. Virginia Code 58.1-3916 – Counties, Cities, and Towns May Provide Dates for Filing Returns and Paying Taxes
4
Virginia Code Commission. Virginia Code 58.1-3974 – Redemption of Land by Owner; Lien for Taxes Paid
5
Virginia Code Commission. Virginia Code 8.01 – General Provisions for Judicial Sales
6
Virginia Code Commission. Virginia Code 58.1-3975 – Nonjudicial Sale of Tax Delinquent Real Properties of Minimal Size and Value
7
Internal Revenue Service. Canceled Debt – Is It Taxable or Not?
8
Internal Revenue Service. Topic No. 409, Capital Gains and Losses