Can I Sell My House Despite a Tax Lien?

Neglecting to pay your property taxes, federal income taxes, or state income taxes could lead to the federal, city, or state government placing a tax lien on your property. This lien acts as a security for the government to ensure they receive the unpaid tax amount. Unfortunately, this lien also means that any profit from selling your home is inaccessible until the lien is resolved.

The situation worsens with the government’s imposition of extra penalties and fees for nonpayment, turning even a small lien into a significant financial burden if left unaddressed. Therefore, if your home is under a tax lien, addressing it promptly is crucial.

How do you do that? Take a look at your options below.

1. Listing Your House for Sale:

Selling your house is still an option, even with a tax lien. This route can be viable if you’re in need of funds to clear the lien, provided your home equity is sufficient. To sell, you need to ensure the sale price covers both the lien and your mortgage before transferring ownership to the buyer. However, if the home’s equity does not cover these amounts, the tax lien needs to be settled prior to the sale, or you could request the lien-holder to discharge your tax debt.

If you don’t have enough equity in your home, though, you may not be able to pay off both your lien and the mortgage with the proceeds from the sale. If that’s your current situation, you’ll need to pay the tax lien before you can sell or petition the lien-holding government body to discharge your tax debt.

2. Opting for a Cash Buyer:

Using a realtor can incur significant fees, which, in places like Las Vegas with average home values around $400,000, can amount to $25,000–$35,000. These costs could potentially cover your tax lien. Hence, bypassing a realtor and selling to a cash buyer may be more economical. Cash buyers, or real estate investors, don’t charge commission or hidden fees, and often cover closing costs in their offer. This allows you to sell your home “as-is,” potentially save on realtor fees, settle your lien, and address your mortgage with the proceeds.

3. Seeking a Discharge or Subordination:

For federal tax liens, applying for a discharge or subordination with the IRS is another avenue. A discharge removes the lien from your property, facilitating the sale and transfer of a clear title to the buyer. If the discharge isn’t viable, subordination might be, allowing another creditor priority over the IRS. This can enable refinancing your mortgage, using the funds to clear the tax lien, and subsequently selling your home.

Navigating the Sale of Your House with a Tax Lien

Selling a house with a tax lien can seem daunting, but understanding your options and taking strategic steps can make the process manageable and even beneficial. Whether through traditional listing, opting for a cash buyer to avoid excessive fees, or seeking legal resolutions like discharge or subordination, homeowners have viable paths to sell their properties despite tax liens. Each method offers its advantages, tailored to different financial situations and equity levels in the home. The key is to assess your specific scenario carefully, considering the amount of equity in your home, the size of the lien, and your financial goals.

Remember, dealing with a tax lien proactively can prevent additional penalties and fees, preserve your financial well-being, and facilitate a smoother transition to your next home. Engaging professionals such as tax attorneys or trusted real estate investors can provide guidance and support, ensuring you navigate this complex process with informed confidence.

FAQs: Selling Your House with a Tax Lien

Can I sell my house if there is a tax lien on it?

Yes, you can sell your house even with a tax lien. However, the sale proceeds must first be used to pay off the tax lien before you can address any other financial obligations, such as your mortgage. It’s crucial to have enough equity in your home to cover both the lien and any outstanding mortgage to successfully complete the sale.

What are my options for selling a house with a tax lien?

You have several options:

  • List the property for sale, ensuring the price covers the lien and mortgage.
  • Sell to a cash buyer to avoid realtor fees and potentially clear the lien more affordably.
  • Apply for a discharge or subordination of the lien with the IRS, which either removes the lien or allows another creditor priority, making it easier to sell the property.

How do tax lien sales work?

In a tax lien sale, you sell your property with the understanding that the tax lien must be paid off as part of the transaction. The buyer or the closing attorney will ensure that the lien is paid from the sale proceeds before distributing the remainder, if any, to you. This process ensures the government receives the owed taxes, and the buyer gets a clear title.

Can a tax lien affect the sale price of my home?

While a tax lien itself does not directly affect the market value of your home, it may influence the sale process. Potential buyers may perceive the lien as a complication, potentially affecting their offer price. Transparently addressing the lien and having a clear plan for its resolution can help mitigate these concerns.

What is the difference between a discharge and subordination of a tax lien?

A discharge of a tax lien removes the lien from the property, allowing for a clear title transfer to a new owner. Subordination does not remove the lien but allows another creditor (such as a mortgage lender) to take precedence over the lien. This can be beneficial if you’re looking to refinance or secure a loan against the property to pay off the lien.

Need to Sell Your House? Contact We Buy Houses Las Vegas

If you need to sell a house that currently has a tax lien, let our team at We Buy Houses Las Vegas help you out! We buy houses for cash, no matter what kind of condition it’s in, and we can close on the sale in a matter of days. To learn more or get started, give us a call today at 702-620-9669 or contact us online, and we’ll be in touch. Learn about the average time it takes to sell a house in Las Vegas