It’s no secret that tax issues can cause a lot of uncertainty when it comes to your finances, but they can also make it much more complicated to sell when you are ready to part with your home. There are many different types of liens that may be placed on your home for delinquent payments, one of the most common and difficult to clear being the tax lien.
A tax lien is one of the most worrying things the IRS can level against you, but your back isn’t up against the wall if you have a lien placed on your property. In fact, if you work with the right professionals, you may still even be able to sell a house with a tax lien on it. Here is what you need to know.
Can You Really Sell a Property with a Lien on It?
Yes, the good news is that you can sell a property with a lien on it.
However, there can be complications and as a seller, there is a risk of losing money, especially if the sale process is drawn out. Before we dive deeper into selling a property with a lien, let’s look closer at what a lien actually is.
What Does It Mean to Have a Lien on Your House?
The Balance defines a lien as “a legal claim or right against a property.”
Liens allow an individual or an organization to claim the property or use it as leverage to satisfy debts and obligations. Property liens may be filed for various reasons, which may include but are not limited to:
- Unpaid taxes (filed by the government: federal, state, county, or city)
- Unpaid HOA fees (filed by the Homeowner’s Association)
- Outstanding payments/debt for services, renovations, and purchases (filed by contractors, credit card companies)
- Outstanding payments for child support (filed by an ex-spouse)
A lien on the house may be a red flag to potential buyers. Liens typically are public record and easily searchable by homebuyers considering the property as an investment.
If a seller can find a buyer quickly and has enough equity in the property, there shouldn’t be many issues. However, if the sale of the house won’t even cover the lien, it’s an issue and the buyer is likely to drop out. Buyers usually prefer a home with a clean title.
How Long Does a Lien Last?
Lien length varies depending on the type of lien and foreclosure doesn’t always clear the lien. To have a lien removed from the public record after all lien requirements are met, a release of the lien must be filed.
If you don’t do this, the lien will remain on the property title. When there are municipal liens on the property, the buyer becomes responsible for those if the seller doesn’t pay them before closing. A property investor may decide it’s worth taking on the lien(s), but don’t expect this of an average home buyer.
If the lien is greater than the amount of equity built in the house, you may be able to obtain a federal tax lien certificate of discharge. This only works with a tax lien and if the owner is selling the property.
This certificate indicates the intent of the IRS to release the lien while removing the threat of property seizure. This process can be extremely time-consuming and it requires working with the IRS. Poor credit can create additional problems during the procedure, limiting your ability to find another place to live.
Does It Make Sense to Sell to As-Is?
For some owners, a lien on the property makes it almost impossible to sell. Selling as-is becomes the best option.
This allows you to pay off debts with a portion of the sale proceeds and eliminates the need to invest in repairs, inspection fees, and other home-selling expenses. Because the process is complicated, it’s recommended to rely on professionals who know how to deal with the legalities of selling a property with a lien.
In some cases, selling your home quickly can not only get you out from under this issue but provide a quick infusion of cash to get you back on your feet. To make this happen, you need the help of HomeGo. We can help you sell your home quickly —at a fair price— while avoiding the issues you may have when trying to sell a home with a lien via a traditional real estate agent or on your own. Our licensed agents will help you through the closing process and assist with liens and title issues so you don’t have to go it alone.