What is a Tax Lien?

If you have failed to pay your federal, state or property taxes or a municipal charge like a municipal tax in full, you may have received notification that a tax lien has been placed on your home and are wondering “what is a tax lien?”

Although tax liens prohibit you from selling your property until you’ve paid the taxes, plus interest and penalties, you owe, you can still sell a house with a lien with expert help. 

What Does a Tax Lien Mean?

A lien isn’t the same as a levy, which would allow the government to seize your property to satisfy your debts. Even so, liens are a concern because of the possibility of a lien-holder confiscating your property if you are still unable to pay.

Once instated, federal tax liens apply to your property until you repay all your outstanding debts. This can put a hold on your credit lines and other opportunities, making it crucial to think about satisfying the liens as quickly as possible.

How Do Tax Liens Work?

All states have laws that allow the local government to sell your home in a tax sale to collect delinquent property taxes. The government auctions tax liens off to people in the community to recover its lost revenue. Buying a tax lien is an investment, as the owner can recoup your tax payments, with interest and penalties.

Once you’ve paid the amount you owe, the government issuing the lien removes the tax lien on your house within 3o days. If you don’t repay the taxes and penalties in time, your lien-holder can foreclose on your property.

Dealing with a Tax Lien on a House

Although a lien typically prohibits you from selling or refinancing your house, you can use the money earned from selling your property to companies that buy homes to satisfy your debt. These companies normally pay out quickly in cash, meaning you’ll spend less time with your home on the market and be able to resolve your lien, fast.

If the proceeds don’t satisfy the lien, you’ll have to apply for either subordination or withdrawal.

Subordination allows you to yield priority in debt payment. This can mean allowing an organization like the IRS to sell your debt to third-party creditors, potentially freeing you to sell your home.

Withdrawal is simply when the federal tax lien is withdrawn from your property. You must be current on your tax payments and have filed taxes correctly for the past three years to qualify for withdrawal. When an entity like the IRS agrees to withdrawal, they’re allowing you to adhere to a more relaxed payment plan, perhaps because you’ve already paid back your debt in part. However, you will still have to pay back the full sum.

Your house may be released if the government realizes that its interest in your property is of negligible value. To achieve this, you’ll have to prove that your home is not valuable, as if the property is defaced in some way. If you’re dealing with a distressed house, you might want to consider selling to companies that buy homes in any condition and can take the property off your hands easily.

Another option is to dispute the lien. If there’s a creditor other than the federal government involved, the government might be willing to settle in or outside of court for a smaller payment, depending on your circumstances. With a tax lien, there’s the possibility that the IRS accidentally counted debts for the wrong year or that you’ve experienced identity theft. Either of these situations would allow for an immediate release on your property.

How To Sell A House With Tax Liens

Selling houses with outstanding liens may be difficult, but it’s not impossible. As long as you can pay off the lien before you conclude your sale, you’ll be in the clear.

One option to pay off your debts is adding the taxes owed to the property price when putting it on the market. This might seem appealing because you’ll need to clear all liens before ownership can be transferred to the buyer, but it’s difficult to sell a house at a marked up price.

If the current housing market doesn’t support a higher price, you might have difficulty selling your property, or you may be forced to accept a smaller profit from your home sale than you would have liked.

Consulting with a real estate professional or getting a home valuation is extremely helpful for finding the appropriate fair market price.

Having tax liens on a house can make it difficult to sell, as you’re required to disclose this on the title report to potential buyers. Homebuyers may become concerned about the property’s legal status and hesitate to close, resulting in a long and frustrating selling process.

You’ll need to account for additional costs involved in selling your house, such as transfer taxes or broker fees. By selling to cash home buyers Tampa, you can get a house with tax liens off your hands without racking up realtor fees. Cash home buyers are companies or individuals with the resources to purchase your property upfront in cash, without needing a mortgage.

Companies that buy homes as is can be very helpful as you navigate liens, as cash home buyers have plenty of experience helping sellers get rid of distressed properties efficiently.

If you’re looking to unload a house quickly, selling to cash home buyers can be a great solution. You won’t have to worry about navigating a complicated sales process while trying to eradicate liens or other liabilities, because a professional can help you deal with the paperwork involved.

Sell Houses with Tax Liens to Simple Sale

If you have a tax lien on your house in Florida, look for cash home buyers in Tampa, Orlando, Kissimmee, or Melbourne. Simple Sale is a reputable cash home buyer in Central Florida that makes selling a distressed property quick, easy and stress-free. We’re here to help you turn a tricky sales process into a simple, hands-off transaction.

We buy homes in any condition in cash, freeing up your financial situation so you can focus on paying off your debts today.

If you’re struggling with foreclosure, tax issues, or legal hassles, we’re here to take houses off your hands quickly without unnecessary fees. Contact us now for a great offer on your house.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Simple Sale encourages you to reach out to an advisor regarding your own situation. Please consult with your advisor when making legal or financial decisions.

Image Credits

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