How Sell A House With A Tax Lien In Texas

You know what they say: things have a way of catching up with you – be it unpaid property taxes or income taxes. It’s time to bite the bullet and pay the tax you owe, even if it means you need to sell your home to pay off your debt. Accept responsibility and sell a house with a tax lien with the guide below.

What Is A Tax Lien On Your Home?

What is a tax lien on a house? Perhaps you owe $30,000 in back taxes to the federal government. After several vain attempts at collection, they have placed a tax lien on your home. 

A tax lien is a legal claim that the government can make on your property due to unpaid taxes. Unfortunately, if money is tight and you can only pay off your tax debt by selling a house, you must first satisfy the lien before being able to refinance or sell your house.  

Can I sell my house with a tax lien?

Technically speaking, selling a house with taxes owed is still possible in cases where the sale proceeds will be enough to cover both the mortgage and the lien on the property that you owe. 

Types Of Tax Liens 

One of Texas’ perks is having no county or city and state department income taxes. Did you know that they can auction your lien in other counties through a tax lien certificate? Texans’ incomes or salaries are only subject to federal income taxes. 

If you have overdue federal income taxes, the Internal Revenue Service (IRS) will place a federal tax lien on your home. 

Lenders collect prepaid costs, including property taxes at closing, and for good reason. Outstanding property taxes can lead to a property tax lien on a house.  

Aside from federal tax liens and property tax liens, judgment liens, homeowners association liens, child support liens, mechanic’s liens, and state tax liens also exist.  

How Tax Liens Affect Home Sales

Can I sell my house with a tax lien? Earlier, we discussed that you could close on your home if you have enough equity to cover the mortgage you still owe and the tax lien. The sale closes, and the closing attorney will submit the payment to the lien holder on your behalf. The lienholder then removes the lien on your property. 

But what if the equity you have built so far isn’t enough to pay off both mortgage and the tax lien and all other closing costs? Can a tax lien be paid at closing?

Yes, if the sale proceeds won’t sufficiently cover the full amount of the tax lien, you can bring the remaining amount to closing.

However, if you are strapped for cash, you can either negotiate a payment plan with the lien holder or deal with the home buyer to shoulder the lien.   

Bankruptcy is the last resort of some property owners.  

Can I List My House For Sale If I Have A Tax Lien?

Yes, you can list your home for sale even if you have a tax lien. But it’s best to consult a tax attorney first, as selling a house with a tax lien will go through a different procedure than the standard home selling process. 

How To Sell A House With A Tax Lien

  • Sell your home to a real estate investor or cash buyer as-is, tax lien and all. When you list with a traditional real estate agent, you have to account for their commission and the repairs you have to make. The process could take several months, and you will be incurring penalty fees and months’ worth of interest the whole time. You could close in as little as 14 days with a cash buyer, even if you have a home in poor condition.  
  • Dispute the lien with the lien holder. When you have evidence that the lienholder has filed it in error, you can challenge the lien. For example, the lien could be in another person’s name, you owe less than the past due amount, or you have paid the lien already. You can also dispute with the lienholder if they are yet to provide the certificate to lift the lien on the house from the previous owner. In addition, the IRS will likely require that a tax advisor mediates on your behalf. 
  • Another option is to work with a realtor to find a home buyer willing to pay off the lien. The search can be difficult, but finding a buyer willing to do this is possible, especially in hot markets. You can also apply for a personal loan from a lender, but this route may be trickier than finding a buyer, as lenders won’t allow you to take out a loan if you have delinquent taxes. 
  • Request a certificate of discharge. A Certificate of Discharge removes the tax lien from your house. The Department of Revenue will often grant a release if you have a similar asset to which they can reassign the lien or if you have paid off a part of the taxes owed.  
  • Lastly, pay the lien. The IRS releases tax liens 30 days after you have paid in full. Be aware that if you have involved a separate lender and continually fail to pay your loan, the lender can press criminal charges, resulting in jail time.

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