Can You Sell a House that’s Behind on Taxes?

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April 11th, 2019

Are you looking to sell a house that’s behind on taxes, but don’t know where to start?

If you owe the IRS income or property taxes, the government can impose a tax lien on your property. The lien will only be enforceable once the government officially records that you’re overdue on your taxes.

Nonetheless, it makes selling the property nearly impossible.

Once you receive a Notice and Demand for Payment from the government, you’re on the hook for your overdue taxes. Until those taxes are paid, the lien will remain on your house and you will not be able to sell.

That’s because you have to settle all delinquent taxes before you sell or refinance your home.

That said, there are some options available for those looking to sell a house that’s behind on taxes.

Read on to discover what happens when you fail to pay your taxes and how to save the home so you can sell.


What Happens When You Fall Behind on Your Taxes?

There are many reasons why people fall behind on their taxes:

  • Missed payments
  • Personal events
  • Health issues
  • Job loss
  • Divorce
  • Unexpected debt

And the scary thing is, over $14 billion in property taxes go unpaid across the United States each year. This puts many people closer to foreclosure than they ever thought possible.

No matter why you’ve fallen behind on your taxes, the county can place a lien on your property if you haven’t paid your bill. In fact, the taxing authority can even go so far as to initiate a tax sale of your property to satisfy the taxes you owe.

When this happens, one of four things can happen:

  • Your house will be sold to the highest bidder at auction
  • The buyer will receive a certificate of purchase and after the redemption period expires the purchaser will receive the title
  • The state will sell a tax certificate that allows the buyer to pay off the property taxes in full and earn interest on investment
  • Your house will be seized by the taxing authority

The problem with all of these options is twofold. To start, lenders don’t like to enforce any of these options when there is still a mortgage attached to the property. That’s because they don’t want to lose any money during a tax sale. That’s why many lenders will advance the amount due in property taxes and tack on what they’ve covered to the mortgage for the homeowner to pay.

Second, none of these options gives you the option to sell your home fast. And if you haven’t been paying your taxes, chances are you don’t have the money to pay back your lender, even with an advancement. This is especially true when they charge you additional fees and fines for fronting you the money in the first place.

That’s why if you’re in a situation where you need to sell a house that’s behind on taxes, you need to understand your options.


How to Sell a Home That’s Behind on Taxes

If you can’t afford to pay your delinquent taxes, but want to sell your house, here are your best options:

1. Make an Objection

As a homeowner that’s delinquent on property taxes, you have the option of objecting to the taxing authority’s assessment.

You can claim one of two things when you object:

  1. Claim that the assessment exceeds the property’s taxable value and that the amount you owe is too much
  2. Argue that the property has been assessed incorrectly compared to similar properties in the area

If you win the objection, your tax liability will be reduced. Although you’ll still have to pay off the remainder if you want to sell, a reduced bill makes things a lot easier.


2. Seek Reduction, Deferral, or a Compromise

Every state has a way to reduce or defer taxes owed to the IRS. There are several factors, such as age, disability, and income level that play a role in whether you’ll qualify for a reduction. You might even qualify for a deferment if you have experienced a financial hardship, although this doesn’t work if your taxes are already late.

Lastly, you might be able to strike a compromise with the taxing authority to waive penalties or accrued interest so you can pay back what you owe faster.

Again, you cannot sell your house that’s behind on taxes until what you owe has been paid. However, these options make paying off your debt a lot easier, so you can sell faster.


3. Apply for Subordination

If you’re having trouble paying your property taxes, the IRS may be willing to work with you to get the property sold without paying the lien in full.

Further, the IRS may be willing to subordinate itself (or put itself behind) other creditors and let you sell you close on the sale of your house.

The IRS figures that if you can successfully sell your house, you’ll pay back at least a portion of what you owe them. And something is better than nothing when it comes to debt collection.

Keep in mind, if you get approval for subordination, you’ll still owe on any other liens that have been placed on other assets. That said, you’ll have been able to sell your house with a clear title, which is a step in the right direction.


4. File for Bankruptcy

Filing for Chapter 13 bankruptcy is a good way to help wipe away all your debt, including your property taxes. With a Chapter 13 bankruptcy filing, you can propose to the IRS a payment plan that will let you pay off what you owe on your terms.

With your proposal, you can even consider submitting an Offer in Compromise. If the IRS accepts your offer, you’ll be able to pay less than you owe and have the remainder forgiven.

Once the debt is paid, you can then sell your house and start over debt free.


5. Sell Your House

Up until now, we’ve made the claim that you cannot sell your house if you are behind on your taxes. While this is still true, there is a way to sell your house with a clear title, and pay your taxes in full, if the market allows.

If you can sell your property for more than the mortgage is worth and collect enough profit to cover closing costs and the property taxes you owe, you’ll be in the clear.

Of course, this is not always as easy as it sounds. After all, if everyone could just sell their house for a huge profit and satisfy their debts, they would.

That’s why getting help with selling your Minnesota home fast is sometimes necessary.

If you need a way to sell a house that’s behind on taxes and are in a financial situation that won’t allow you to pay the debt over time, contact Homestead Road for a quote on your home.

We can evaluate your home and offer a fair, all-cash offer for your house, so you can pay off your mortgage and start paying back your property taxes. Our process takes into consideration that sometimes life gets hard. And the last thing you need is a hassle from those trying to buy your house.

When you sell your home to us, we guarantee it’ll be quick, easy to understand, and require no work on your part. You won’t even need to make any repairs or clean up. We’ll buy your home as-is and let you reclaim your life and move forward.

So, what are you waiting for?

Contact us today and see how we can help you get from under delinquent property taxes and a home you want to sell. Trust us, you’ll feel a lot better when you can put this behind you.