Do you need to sell a house with back taxes?
What are back taxes and liens?
Freedom Home Buyers often deals with a homeowner who needs to sell a house with back taxes. We purchases homes with taxes owed or even liens against the property. When a homeowner fails to pay property taxes on a given parcel of land or home, the taxes accrue (with interest) and must be paid to convey “clear title” in the event of a sale. If the amount is substantial enough, or the time frame significant enough the government may place a lien against the property, or in the worst case scenario… seize the property outright from an owner.
There are many reasons someone might fall behind on their tax payments:
- Missed Payments
- Unexpected Events
- Health Issues
- Job Loss
- Upside Down / Negative Equity
The bottom line is if the property is seized the owner is left without compensation. Sometimes it is far better to sell a house with back taxes to an investor like Freedom Home Buyers that can close fast and clear your debt with the city and county than it is to let the property be seized and sent to auction.
Here are some FAQ’s about back taxes and liens:
- 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?
Q: Am I able to Sell a house with back taxes?
A: 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 lein only exists after the federal government assesses your liability (a.k.a. records your overdue balance), and then sends you a Notice and Demand for Payment (a.k.a. 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.
Q: What if your house or apartment sells for an amount less than the amount on your lien?
A: 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.
Q: How To Sell A House With Back Taxes.
A: If you fall behind on your property taxes, you can sell your house before [or after] the county places a lien against it [and before it] forecloses. When you find a buyer, the taxes must be current at closing. If they aren’t, you can’t transfer the title. Since you can pay the delinquent taxes you owe from the proceeds of the sale before the close of escrow, this allows you to pass clear title. You can also negotiate with the buyers for them to pay any back taxes. Although you can make it a condition of sale, you must clearly stipulate in the real estate purchase contract who is responsible for paying the delinquent taxes.