Can You Sell Your House With a Tax Lien?
Let’s say, for one reason or another, you haven’t paid your property taxes over the past couple of years.
(Listen, it happens!)
Maybe you genuinely forgot to make your payment the last couple of years and now you owe a fairly large sum. Or it’s possible that you found yourself in a compromising financial situation and had to choose between putting food on the table or paying your tax bill (and you obviously chose the former). Whatever the case may be, your city or county has the right to place a tax lien against your home.
As a homeowner, the term “tax lien” is a little scary. And it begs the question: Can I sell my house with a tax lien?
The short answer to this question is yes, you can sell your house with a tax lien. But it’s not always as simple as that. In order to pull off this maneuver, you need to understand what you’re doing and – perhaps most importantly – work with the right people to make it happen. In this article, we’ll give you all of the information you need to make an educated decision.
What is a Tax Lien?
Your city or county government has the ability to place a tax lien on your home when you fail to pay the property taxes you owe them. Likewise, the IRS can slap you with a tax lien if you fail to pay your state or federal income taxes.
When a government body places a tax lien on your property, they’re basically filing a legal document that says they want the money that’s owed to them. It’s like a placeholder on the property that makes sure you don’t get access to the profits on the sale of your home until they’ve been paid first. Furthermore, you can’t do things like refinance your mortgage until the tax lien is satisfied.
While a tax lien doesn’t mean you lose your property – it’s still yours to live in and sell – it does make things slightly more complicated. And if the lien lingers long enough, the government could actually start the foreclosure process. Thankfully, it doesn’t have to get this far. Selling your home is one of the more common and effective solutions.
How to Sell a House With a Tax Lien
For 99 percent of homeowners, their house is their most valuable financial asset. So if you find yourself burdened by a tax lien that you can’t pay off, the best way to escape the situation is by selling that asset. In most cases, there will be enough money to pay off the tax lien and the mortgage. (You might even walk away with some equity in your pocket.)
Here’s how this process typically works:
1. Request a Certificate of Discharge
The first step is to request a certificate of discharge from the IRS. Despite what it sounds like, this document does not dissolve your debt. Instead, it releases your property from the lien for the purpose of allowing you to sell your property and use the equity to satisfy the debt. Without this document, it’s impossible to sell your home outright. You need this certificate in order to temporarily detach the lien for the purposes of selling.
2. Find a Buyer
Once you have a certificate of discharge in hand, you can sell your property. You don’t technically have to let buyers know that the property has a tax lien on it, but you should let your real estate team and closing attorneys know. In fact, you’ll be required to present the certificate before closing, so that the funds can be transferred and routed to the proper creditors.
While you can sell your house the traditional way (using an agent and listing on the MLS), it’s almost always better to do an off market transaction. By selling your house for cash to an off market buyer, you’re able to eliminate thousands in costs, fees, and commissions. This preserves the equity you have in the home and allows you to satisfy both the tax debt and the mortgage.
4. Pay Off the Lien Amount at Closing
At closing, the attorneys will remit payment to the IRS for the amount they’re owed. The IRS will then file a release of the lien (which removes it completely). Next, the mortgage is paid off. The remaining amount, less any fees and commissions, are due to you.
Let Samuel Property Group Help
Life happens, taxes are a pain, and sometimes they don’t get paid on time. But you shouldn’t have to live like this any longer. If you can’t pay off your delinquent taxes within the next couple of months, it probably makes more sense to sell the house and start fresh.
At Samuel Property Group, we work with homeowners from all situations, backgrounds and walks of life – including those who have tax liens hanging over their heads. And we don’t believe a tax lien is anything to be embarrassed about. In fact, we may be able to purchase your house, so that this whole mess can go away.
Please contact us today to learn more!