Discovering a tax lien is usually not a pleasant experience. The taxation entities can establish a claim on your home if unpaid taxes reach a certain threshold. The exact amount varies from county to county, but a lien can be created when you don’t pay the annual taxes. The tax foreclosure process can begin when charges have been due for 3-5 years. It’s possible but complicated to sell a home with tax liens. With the help of an attorney, you can try to come up with a solution, negotiate a repayment plan, or sell the house.
When selling a home, you get two options. You can pay the taxes before listing the house, get the lien removed, or you can pay the taxes on the closing day. Sometimes, you don’t have enough funds to pay the dues before the closing day, so you need to consider other options.
Taxes Have a Higher Priority
State and federal income taxes can create a first lien on your property. That means, your existing mortgage takes the second position. As you sell your home, the taxes will be paid first. After that, your mortgage is paid and then any other debts. It’s all great when the sale proceeds are enough to cover all the liabilities. No one will object to the sale, but the mortgage company won’t be happy if your home’s value is not enough to pay the loan. They can prevent you from selling the property because they want to be paid the full amount.
How to Deal with a Tax Lien Before the Sale?
Discuss the situation with the tax attorney. You can negotiate a solution with the taxation identity, aka IRS. One such option is to pay a partial amount to the IRS. Acknowledge the debt and create a repayment plan to pay the taxes later.
The tax lien may be a result of identity theft or human error. Investigate the information and make sure that officials have the correct data, and a tax lien was attached to your home. Another way is to negotiate the subordination of the loan. When that happens, the tax lien is no longer the priority. Your mortgage will resume its position. Now when you sell your home, the mortgage will be paid first, and the IRS will be paid after that. Changing the priority won’t hinder the sale.
In some cases, it’s possible to negotiate a loan withdrawal. You acknowledge the debt, but show you can’t pay because of genuine hardship. The lien is removed, and you can continue to sell the house.
The best bet to get rid of a tax lien is to pay the outstanding amount in full before the sale. However, it’s not possible in most cases, and when you list the home on the MLS, you lose your chances of gaining maximum exposure because of the tax lien. A simple solution is to contact a cash buyer like Fast Home Offer, Utah. You can sell your house fast within days without worrying about tax liens or title issues.