Nobody enjoys paying taxes. Unfortunately, everyone has to pay them and there’s no escaping them. That doesn’t mean people don’t try.
In 2009, over 8.2 million Americans owed money for back taxes. And that’s just federal taxes — still more people fall behind on property taxes. All of this culminates in the government taking action and placing a tax lien on your home.
Are you wondering “can I sell my house with a tax lien?” The answer might surprise you. Read on to learn all about tax liens and how they affect the sale of your home.
What Is a Tax Lien?
There are two types of tax liens — income tax liens and property tax liens. Both can attach to your home and affect your status as a property owner.
Income Tax Lien
An income tax lien is a lien that the Internal Revenue Service (IRS) places on your home when you fail to pay your taxes. It totals the amount of taxes that you owe as well as any penalties or interest that accrued from the date of delinquency.
Property Tax Lien
Whenever you own any type of real property, be it a house or land, you have to pay property taxes. Generally, when you have a mortgage on your home, your lender pays the property taxes so most homeowners don’t have to worry about property taxes while they’re still paying their mortgage.
Once the mortgage is paid off, then the homeowner is responsible for paying property taxes. If you’ve gone 30 years without paying property taxes, you’re probably not looking for a tax bill, let alone paying it. But if you don’t pay your tax bill, then the government can put a property tax lien on your home.
Other Types of Liens That Can Affect Your Property
Income and property tax liens are not the only types of liens that can affect your status as a homeowner. In fact, there are several other types of liens that attach to real property. The following are the main types of liens you should watch out for.
Back Child Support Lien
If you owe back child support, then the party to whom the child support is owed can take out a lien against your property. In Colorado, custodial parents must obtain a court order for failure to pay child support. State and county child support agencies then file child support liens against the parent in arrears.
Child support liens are valid for 12 years.
Judgment Lien
A judgment lien occurs when someone sues you and obtains a judgment. So if you fail to pay an old credit card bill, the bank can sue for the money you owe. Or if you at fault in an accident and lose a personal injury case, then the plaintiff gets a judgment against you. If you fail to pay the judgment, then the winner of the lawsuit can place a lien on your home.
How Is a Tax Lien Enforced?
Tax liens are enforced through the sale of your home. Lienholders can force the sale of your home, deduct the cost of the lien, and return the proceeds to you. They can also just enroll the lien and wait for you to either sell or refinance your home to get their money.
Property tax liens are enforced through a tax lien sale. The frequency of tax lien sales varies depending on the county and state. In El Paso County, Colorado, the county treasurer sells homes with delinquent tax liens once per year.
How Do I Clear a Tax Lien?
The easiest way to clear a tax lien is to pay it. This may seem like a simple answer, but the only way to avoid foreclosure is to pay the lien.
If you think the tax lien is without merit, you can fight it. For example, if you have a property tax lien on your home, you can object the amount of the assessments in order to reduce the amount of tax liability. You can also seek abatements, deferrals, or compromises if you qualify for them.
If you want to effectively object to a property tax lien, then contact an attorney who can help you choose your best options.
Not sure whether your home has a tax lien attached? Your county’s tax assessor or treasurer has a list of delinquent tax liens held by the county. If you live in El Paso County, Colorado, check here to see if your home is listed.
Can I Sell My House with a Tax Lien?
In short, yes, but with some limitations. First, you cannot close the sale of a home without first satisfying the lien. That means that you must arrange for a portion of the sale proceeds to go toward paying off the lien.
Things are more complicated, however, when you have a mortgage on the home and the cost of the lien and mortgage payoff combined exceed the sale price of the home. Mortgages are liens themselves, and when you sell a house, the liens are paid in the order they were recorded. Since the mortgage is recorded first, it would get paid first.
Any money left after the mortgage is paid would go toward the tax lien. But if there’s not enough money to pay the tax lien after the mortgage is paid? In this case, you either need to pay off the lien out of pocket, or you have to wait until you get a higher offer to sell the home.
Want to get out from under your tax lien without having the government sell your house to the highest bidder (who is trying to pay as little as possible)? Your best option is to sell you an all-cash buyer who can purchase your home fast. They’ll come to look at your home and give you a cash offer that’s likely higher than what the government would get.
Need to Sell Your House Fast?
Can I sell my house with a tax lien? Yes! Whether you need to sell your home to help pay off a tax lien, or you’re moving to a new home, you can absolutely sell your home if it has a tax lien attached. Remember that whatever profits you make from the sale will be less the amount of the tax lien.
Did you recently purchase a new home and need to sell your old home fast? Need to clear a lien? Whatever reason you have, we can assist you with getting your home off the market as soon as possible. Contact us today to see how we can help you!
