property tax lien

Can I Sell My Home with a Property Tax Lien?

Every year, 20-25 billion dollars in local property taxes go unpaid. But what does the government do to get that revenue back?

A tax lien is what happens when you don’t pay your property taxes. It’s the government’s way of ensuring they receive their payment. If you have a property tax lien, it could hinder you from selling your home.

But it can’t altogether stop it. There are solutions for selling your home even if you have a property tax lien.

If you’re wondering whether you will be able to sell your home with a property tax lien and how you can go about doing so without creating more problems for your credit, we’ve got the answers you need. Read more about your options below.

What is a Property Tax Lien?

If you neglect to pay your taxes or you’re delinquent on taxes you owe to the IRS, the government can make a claim against your property. It’s not just property taxes that can result in a lien – it can be from income taxes, property taxes or others dues that you haven’t paid.

An IRS tax lien protects the governments interest in your real estate, personal property and other financial assets. If the IRS sends you a Notice and Demand for Payment for a tax liability that’s been assessed against you and you don’t pay, they automatically have a lien on your assets.

In order to enforce the tax lien, the IRS has to file a Notice of Federal Tax Lien. They file this with the recorder of deeds or the Secretary of State depending on where you live. That Notice makes your tax lien public information.

Can You Sell Your Property with a Property Tax Lien?

The short answer is yes. You can still sell your house if you have a tax lien on your property. However, you have to pay your tax lien before you can sell or refinance your home.

You can even go through the entire process of selling your home with a property tax lien – you just have to pay the tax lien before closing the sale. When you’re selling the house, the lien amount is added to your expenses during the closing.

You might have some trouble selling your house if you have a property tax lien, though. It’s listed on the title report and this may cause potential buyers to hesitate in the purchase. Buyers may be worried about other debts or issues with the property if they find out about the tax lien.

You have one of two options in this case. Your first and best option is to clear the tax lien before attempting to sell your house. If that’s not a possibility, there are other options available to you.

Options for Selling a Property with a Property Tax Lien

If you have a property tax lien on your property, there are a few options available to you when you’re trying to sell your home. We’ll discuss these option in more detail below.

Pay the Taxes on Your Own

The best option for selling your home when you have a property tax lien is to pay the taxes on your own. If you have the amount available, then the best advice is to pay the property tax lien as soon as you can.

If you are unable to pay the amount before selling, you can try to work with the IRS to find a solution, which we’ll talk more about later.

Another option is to file for Chapter 13 bankruptcy. Though this won’t clear your debt, it gives you greater negotiating power. After filing, it is likely the IRS will be more sympathetic to creating a payment plan for you to pay back your dues over a period of time.

Dispute the Lein

If you have a property tax lien on your home, one option is to dispute the claim against your property. You can pursue this option if you believe that the lien was wrongly placed on your property.

Your first line of attack is to bring your case to the creditor. They may be willing to release the lien.

If you request to release the lien is denied by the creditor, then you can take them to court. Your lien may be released if you win the case. And if you don’t win, you can try to come to a settlement with the creditor.

Settling won’t get rid of the lien amount altogether but it will reduce the amount you have to pay. In lieu of getting absolutely nothing, a creditor is often willing to come to a settlement.

Apply for a Subordination

Because of the reasons behind the economic recession that began in 2008, the government has processes available to people who are struggling to pay their taxes.

This system makes it possible for the IRS to work with you so you can sell your property. You can ask that the IRS discharge the amount of your back taxes so that you can complete your sale. You can also do this if you’re trying to refinance your home or restructure your mortgage.

Discharging means that the IRS will subordinate the lien to other creditors. The IRS essentially sells your debt to other creditors and they still get paid at the closing.

Your debt is now owed to the third-party creditor. You sell your home and pass on a clear title to the buyer, but you still owe the back taxes.

One option is to apply for a subordination if you’re the property owner, through a mortgage company or through other creditors with liens.

You can also apply for the Direct Debit Installment Agreement programs. These programs will help you get your lien withdrawal granted once you’ve made payments.

Increase the Selling Price

If you can’t pay your taxes or dispute your lien and the IRS is unwilling to subordinate your back taxes, the next option for selling your home and passing on a clear title is to sell for an amount that will cover the property tax lien.

This method is straightforward. You simply add the amount of money you ower to the price of the house.

This is only possible if the real estate market will support that price. Nobody is going to buy a home that is priced higher than the current market value.

When your home sells, you can use the funds to cover the property tax lien. But you have to pay the lien before your buyer can receive a clear title. This is because all property tax liens have to be paid before ownership is transferred.

Consider Selling your home for cash

If you need to sell your home quickly because you’re relocating, having to downsize or you’re selling your home due to divorce, you may need to sell your home quickly.

Selling your home for cash is one way forgo realtors fees that can cost you up to 6{f5b803b3ff349ad072c7061546ce6e083822d9eb1c075da9c628d64f032e5ca9} of your selling price. Real estate agents charge that percentage of the selling price and that’s money that can toward paying your lien.

If you have a property tax lien, there are companies that will buy your home for cash, and the deal can be done in less than a week. That’s especially true because there are currently fewer homes available then there are people looking to buy.

It’s a seller’s market right now, so take advantage.

Important Things to Note

There are a few things to keep in mind if you decide to sell your home with a property tax lien.

Before Closing

All delinquencies must be paid before closing the sale of your home in order to pass the buyer a clear title.

If you don’t satisfy this requirement, the amount owed is deducted from your proceeds as the seller.

Other Costs

When pricing your home, remember that there are other costs associated with selling your home. You’ll need to be able to cover broker fees, transfer tax and any water or sewer payments that are outstanding.

Tell Your Realtor

Make sure you tell your realtor that there is a property tax lien on the property. They will help you set your cost accordingly.

They’re also an asset when it comes to negotiating with the creditor. Their negotiating skills may come in handy when asking for a release from your lien.

A realtor can also help ease the worries of potential buyers. Although people may be uneasy about buying a home with a tax lien on it, a good realtor can soothe any concerns they may have.

But of course, there may be others reasons that you’re having trouble selling your home on the market. So make sure you’re covering all your bases.

Are You Ready to Sell Your Home?

Whether or not your home has a property tax lien, it’s a good time to look into selling. The housing market currently has fewer homes available than at any other time on record. There’s a good chance of selling – and selling for a great price.

If you’re thinking of selling your home, contact us to find out how selling your home for cash is quick, easy and profitable.

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