If you are trying to sell your home with unpaid tax liens,
knowledge is power.
- What are tax liens?
- Can the tax lien be paid at closing?
- How do I structure the sale that includes the unpaid taxes?
- Will the government event let me sell my house if there are unpaid taxes?
The more you know about your options, the easier it’s going to be to find a buyer who can help. A few of the biggest questions home owners have are linked to properties with that have tax issues. To help you make a good decision, we have listed a few expects and their suggestions on what to do.
Here are a few expert answers – by the Internal revenue service and professional realtors – to a number of the most typical questions sellers have about selling a home with a lien on it:
Q: Am I able to sell my house when there is a federal tax lien on my Residence?
Answer: A tax lien, is a claim that the government makes on the property if you neglect to pay, or are delinquent on taxes that you owe to the IRS. These may be income taxes, property taxes, or other dues you owe. The lien only exists following the after the federal or city government evaluates your liability, then sends you a notification and Demand for Payment on your home.
The lien may be paid in part or full by equity you’ve built up in your house, or from the sales proceeds you get at the closing.
Q: What if your home sells for an amount less than the amount of your lien?
Answer: Thanks to the economical downturn, the government has strategies in place to assist homeowners that are struggling. The Internal revenue service says you as the taxpayer can request them to release the sum you owe – just to permit the sale to be finished. This is also true from the event of refinancing or restructuring your mortgage. They also offer Direct Debit Installment Agreement programs That will make it simpler for home owners to receive their lien withdrawals granted on payment.
But do real estate agent and real estate investment professionals have another viewpoint on selling a home with a delinquent tax liability on it? . Here is what these experts have to say :
Q: How To Sell A House With A Property Tax Lien
- Let’s say you are selling a house for $100,000, and you still need to pay $80,000 for your current mortgage.
- There is a tax lien for $5,000.
- At the closing of the sale, both the current mortgage and the property tax lien would be paid from the $100,000 selling price.
- This means you are left with $15,000 as your net profit.
So when buying home with a lien that the amount will be added to a part of the expenses throughout the closing of this sale. These amounts would not be added in addition to the selling cost. You’d expect that the equity is enough to pay the lien cost, however it DOES need to be paid prior to the new buyer may take over the title of the property. Needless to say, now this is a quite simple example and there is numerous other variables and closing costs that must be considered, but hopefully this can help you understand the way the back taxes amount would NOT be added to the initial selling price.
Heather Richman, CENTURY 21 Prestige Realty Realtor
Q: What Are My Potential Choices To Sell My Principal Residency with a Tax Lien On It?
Here are what professional Realtors have to say.
If you owe taxes back, then you can dispute it with the IRS. Another choice is to add the money you owe to the sale price – but only if the real estate market will support it. The proceeds in the sale closing will be able to satisfy the unpaid taxes. This is part of the process and is needed before the purchaser may be able to have a clear title to the property, since all liens have to be wholly cleared before transferring ownership from the seller to the purchaser. In case the market won’t support a higher selling price, then you must pay the remaining amount during the time of closing.
Rodney Camren, Realtor with Keller Williams Realty Intown
You must meet the debt of any back taxes or delinquents obligations before closing. If you don’t satisfy them prior to closing, then the delinquent amount will be deducted from your proceeds at the closing – it doesn’t increase sale price of the home. In addition, it is important to notify your agent on the property about the tax lien in order that they can help in calculating the selling costs. This is all needed to clear the title and be able to sell the property. The remaining lien amount is added in addition to your seller’s closing prices to be paid during the time of closing by escrow.
Michael Sharp, RE/MAX Results
Your proceeds as a seller will decrease in relation to the total amount of the lien. Your asking price doesn’t account for the lien itself but should only reflect the property, and therefore are based 100 percent on market conditions along with other selling factors. As the seller you have to be conscious that these obligations will be your liability unless you’re very persuasive and will convince the purchaser to pick up the total lien amount. My expectation as a pro realtor is that you’re able to secure more proceeds at the purchase to pay your mortgage and closing prices. The residual amount of the owed money will be paid from such proceeds at closing.
Lee Dworshak, Keller Williams LA Harbor Realty
Plenty of individuals ask about adding the quantity of your lien to the selling price of your house. The reality is, the home will sell at a price that the buyer is ready to pay, and the vendor is willing to accept. It does not matter what the obligations of the seller. You’ll have to make up the gap – which could bring about a short sale situation. In this instance, you need to use a Real Estate Agent with Short Sales expertise to make sure that you are able to pay for mortgages, liens, closing costs, and whatever else you owe in case of a purchase.
Frances Garner, Bob Parks Realty, LLC
You need to get a real estate specialist to evaluate the price of your home in regard to its present market value when you are thinking about selling. The truth is, you may need to pay costs of your proceeds from the purchase. The mortgage, seller closing costs, title insurance, delinquent taxes, commissions, etc. The purchaser can even need help with the closing. Tax liens have to be paid prior to you as the seller receiving any profit. You do not add the back taxes to the amount of the selling price, it is deducted from the selling price just like any other closing costs and expenses related to selling your residence.
Mimi Foster, EPIC Real Estate Group