To properly sell your property quickly and efficiently, you must understand the inner workings of the real estate world, as well as the basic laws surrounding it. One of the most common questions from those trying to sell their home is
“How do I sell my home if there is a tax lien on it?”
It can be a scary thought that you’ll never be able to sell your home with a tax lien on it. We’re here to help you out so that you have the right information to start with and can work with professionals to get what you need!
Is it possible?
A tax lien is a government claim on your home that it produced if you neglect to pay your taxes on your property. These taxes can range from your property taxes to your income taxes. A lien does not just appear though.
The government will make a liability assessment on your personal records and send you a notice that tells you how much you must pay. According to federal law, you must pay your delinquent fees before you are able to sell your home. With that said, there are a few exceptions.
You May Be Able To Sell If Your House Is Worth Less Than Your Lien Amount
The federal government has put a few programs into place to allow specific homeowners to sell who can’t afford to pay their property taxes. Essentially, a struggling homeowner may be able to contact the IRS and ask if their delinquency can be wiped.
If you can’t afford your property taxes because of the sheer amount-per-month, you can also try the IRS DDIA Program, in which you can make smaller payments to get your lien withdrawn.
From the Realtor’s Perspective
In this example scenario, let us say that you have a house that you want to sell for $500,000, though you still have $400,000 left on your mortgage that you need to pay off. You also have a tax lien for $25,000. When the sale hits a close, you will have to pay both your mortgage and lien off with that proft. This means that when all is said and done, you will have $75,000.
Your lien does not get added to the sale price of the home. Instead, you must hope that the overall sale price is enough to cover the lien. A new buyer cannot take over a property with a tax lien, so it is up to you to finish paying unless the market supports a higher selling price, which would allow to make that lien a “piece of the overall sale price”.
We hope that our little article was helpful in giving you a basic understanding of tax liens and how they can affect your home selling process. We recommend speaking to a professional IRS employee or real estate agent if you have further questions.
Have you ever had a tax lien on your property? How did you deal with it? Did you ever sell that property? Let us know your experience in the comments!