Can You Sell a House if You Owe Delinquent Property Taxes?
“Can I Sell my House if I Owe Back Taxes?”
Yes, you absolutely as long as there is enough of the proceeds from the sale to pay for the back taxes in full.
How Can I Sell My House With A Property Tax Lien On It?
If you’re looking to sell your property fast, knowledge is power. The more you know about your options, the easier it will be to find the perfect buyer. Some of the biggest questions homeowners have are related to properties with tax liens on them.
What exactly is a tax lien?
Is the amount added to the selling price?
Does the lien need to be paid at closing?
Is it even possible to sell my home if I owe back taxes or are delinquent on payments?
These are all important questions sellers have when looking for a quick sale.
Here are some answers to some of the most common questions sellers have about selling a residence with a lien on it:
Am I able to Sell My House or Land If There Is A Federal Tax Lien On My Property?
A “tax lien” is a claim the government makes against your property if you neglect to pay, or are delinquent on taxes you owe to the IRS. These can be income taxes, property taxes, or other dues you owe.
The lien only exists after the federal government assesses your liability (records your overdue balance), and then sends you a Notice and Demand for Payment (the bill that tells you how much you owe).
According to the IRS you MUST pay the delinquent amount BEFORE you can sell (or refinance) your home. The lien can be paid in part or full by equity you have in your property, or out of the sales proceeds you receive at the closing.
Question: What if my house or land sells for an amount less than the amount on your lien?
Thanks to the economic downturn, the government has systems in place to help homeowners who are struggling. The IRS says you as the taxpayer can request them to discharge the amount you owe – only to allow the sale to be completed. This is also true in the case of refinancing or restructuring your mortgage. They also offer Direct Debit Installment Agreement programs (DDIA) that will make it easier for homeowners to get their lien withdrawals granted upon payment.
How To Sell A House With A Property Tax Lien
Let’s say you are selling a house in Florida for $100,000, and you still need to pay $80,000 for your current mortgage.
There is a tax lien for $5,000.
At the closing of the sale, both the current mortgage and the property tax lien would be paid from the $100,000 selling price.
This means you are left with $15,000 as your net profit.
So when selling a house with a lien the amount would be added to your part of the expenses during the closing of the sale. These amounts wouldn’t be added on top of the selling price. You would hope that the equity is sufficient to cover the lien price, but it DOES need to be paid before the new buyer can take over the title of the property.
Of course, this is a very simple example and there are many other variables and closing costs which must be considered, but hopefully, this helps you understand how the back taxes amount would NOT be added to the original selling price.
Do you owe back taxes and plan on selling the property? Call (202) 826-8179 or complete the Sell Property Fast form.