Selling a home is stressful on its own, and it gets even more complicated when your home has a tax lien against it. A tax lien on a home could impact its sellability, and every homeowner needs to do their research before they consider selling.
If you have a claim on the lien registry, then you should take steps to pay the state tax lien as soon as possible:
What is a Tax Lien on Your Property?
A tax lien is a legal claim that the government puts against real property of an individual or business who fails to pay taxes owed, typically property taxes. Tax liens can be placed against any valuable asset, such as real estate, personal property, and other financial assets, in the case that the asset should be seized if the debt is not paid.
Tax liens provide security to the Internal Revenue Service (IRS) and state governments so that they have some financial compensation for unpaid taxes. For a federal tax lien or IRS lien, they’ll issue a public document called the Notice of Federal Tax Lien. This informs creditors that the government has a legal right to the property in the chance that they also want to collect the asset as payment towards another failed debt payment. This means that the government has a claim to receive the taxes you owe before another lender or creditor.
Liens in general can range from parking violations to HOA liens and sidewalk liens. But there are a whole slew of reasons why a tax lien may be placed on your property. Tax liens occur only when you have a debt against the government. Most often, a homeowner fails to pay property tax, state tax, or federal tax. You must also neglect or refuse to pay the debt on time. Unpaid property taxes is one of the most common causes of a tax lien.
Note that a tax lien is not as severe as a levy, which is when the government actually seizes the property to pay the tax debt. In the case of a levy, you would not be able to sell your house because the government would own it and issue a tax deed.
Can I Still Sell My House With a Tax Lien on It?
While the government has interest in your home through a delinquent tax lien, any property transfer you try to make will be halted. Since a lien makes the property collateral for the debt, the state and federal government have the right to sell the home through a tax sale process to collect the delinquent taxes. If you’re behind in your taxes in Arkansas, then you could lose your home to foreclosure.
Luckily you can redeem the property and get current with your taxes when we purchase your property. How? You can sell the property to us at Gary Buys Houses as we purchase homes with liens on them—no legal preparation is needed.
You can use the proceeds of the sale to pay the back taxes. As an owner, you’re not required to pay the taxes before we finalize the deal. We’ll help document and facilitate this for you!
How Does a Tax Lien Impact Real Estate Sales
As mentioned, tax liens on your property can directly impact a real estate sale. If you are looking to buy or sell a home with a tax lien on it, here is what you need to know:
Is It Bad To Have a Lien on Your House?
Having an existing lien on your home is a bad thing because it means that your home can be taken away from you to pay for a debt. In the state of Arkansas, your home can be seized exactly one year from the date your taxes were due.
If you don’t get caught up one year after that, by the tax lien certificate date, then the county collector can sell your tax-delinquent home through a forfeiture or tax lien sale.
How Does My Tax Lien Debt Impact My House Sale?
Tax liens directly impact your house sale because they could limit you from selling altogether. Typically if there is a tax lien against your home, the value of the debt could be significant and therefore requires the home to be sold in order to pay for it. In other words, the debt is a substantial sum.
If you have other delinquent debts or liens that are minor, then this is a different story. With payable liens, you can still sell your house through a cash sale but the sale may take a little longer as buyers may not want to buy a property with liens on it.
In general, you will make less money when selling a home even without a realtor if it has a lien on it. You might be able to attract specific buyers who want to buy the house before it goes to auction, but this is a smaller pool of buyers. You can sell your house fast for cash to home investors like us, but be sure to confirm they have experience clearing liens and documenting the legal details. You don’t want back tax issues to follow you even beyond the sale of your home.
What Should I Do if I Am Selling my House With a Tax Lien On It?
If you can sell your house even with a tax lien on it, be wary that prospective buyers may try to negotiate down in price. This is fine and a technique associated with selling houses that need work or selling your house “as is.”
Since there is a chance that the house will go to auction and be levied, buyers try to negotiate with you before this point since there’s still a chance that you can make money and get out of the lien. Selling as is or through cash offer is one of the best ways to get out of a lien.
Why You Should Get Rid of a Tax Lien
Tax liens are essentially government debts that you owe, and their existence can impact your ability to get credit, your business property rights and accounts receivable, and all of your assets.
A lien can be attached to all of your assets and future assets acquired during the lien, so you want to remove it quickly. This will allow you to work or operate your business without the government seizing your property and assets. Unfortunately, even if you go bankrupt, the tax lien can continue.
You will have to get rid of the lien on your house before you sell it. Sometimes it is still possible to sell your house with a lien on it, but since the government has interest in your property, they can take the amount that they are owed against your house sale or restrict the sale altogether.
How to Get a House Sale With a Tax Lien On it
The best way to get rid of a lien against your house is to pay off the debt. While an obvious solution, this may not be reasonable for many people as there are usually reasons they are in debt in the first place.
If you can pay it off, the IRS will remove the lien from your property 30 days after the debt is paid and you will be able to sell the house without government interference.
Paying off the debt and selling the house is not your only option. You can also:
- Consider using the home sale to pay off the existing lien (depending on if the government lets you do this)
- Ask a buyer to buy or pay off the owed tax lien as part of your sale agreement
- Pay for the tax lien using a loan or line of credit
- Opt into a payment plan with your taxing authority
- Work with creditors to pay off the lien
- Contest the conveyances against you
- Ask that your mortgage company pay the delinquent taxes and then you reimburse the mortgage company (via mortgage lien)
- Take a cash offer that allows you to pay the delinquent tax as well as all of the redemption interest, fees, and past due amounts
Note that if you don’t pay your property taxes, then you could end up defaulting on your mortgage contract too. If you inherited the house you need to sell and it “came” with back taxes you were unaware of, contact the appropriate authority to become aware of key dates.
Paying off your tax lien is the best way to avoid your house going into levy and losing the house altogether. However, it’s not required if you work with the right buyer. We clear tax lien issues on Little Rock homes all the time. There is no additional legal fee for us to help resolve these issues if we buy the home, and you’ll also save money on closing costs and Realtor commissions.
Ready to get out of your tax liens situation? Reach out to Gary Buys Houses for a free assessment, and receive a cash offer in 48 hours!