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7 FAQs About Buying a House with a Real Estate Tax Lien

Buying a house with a real estate tax lien can be a long process, and even after the sale goes through, the new owner could be at risk of legal action or foreclosure. Here are seven of the most frequently asked questions about buying a house with a real estate tax lien.
Buying a house with a real estate tax lien can be a long process, and even after the sale goes through, the new owner could be at risk of legal action or foreclosure. Here are seven of the most frequently asked questions about buying a house with a real estate tax lien.

Nothing puts a damper on a real estate purchase faster than finding out there’s a tax lien on the property. Even if the lien is small, the prospect of getting angry creditors or the IRS, involved in your transaction is enough to make a prospective buyer think hard about whether they want to proceed. Not to mention the questions a lien raises about the reputation of the seller

But in reality, a real estate tax lien doesn’t have to be a deal killer. Though it complicates things, a determined buyer can work around it, especially with the help and advice of an experienced real estate agent.

Before you get to that point, you must understand what a lien is and all the ways it could potentially affect your investment. Let’s look at the answers of seven frequently asked questions about buying a house with a real estate tax lien.

What does a lien on your house mean?

When a property lien is placed on your home, someone is making a financial claim based on the unpaid bills of the homeowner. The lien essentially freezes the property in place and makes it very difficult to sell. A home with a lien on it can’t be legally sold, refinanced, or transferred. Once a lien is on your home, it can only be cleared after the debt is paid.

What types of liens can be put on a house?

Not just any creditor can place a lien on your home. For example, it’s moderately difficult for a credit card company to put a lien on your home. But it’s a much more straightforward process for a roofer who hasn’t been paid to put a lien on a house.

Mechanic’s or construction liens are connected to unpaid bills for improvements or maintenance on a property. These are placed by the contractor who did the work and to whom money is owed. A mortgage lien is placed by a lender if the mortgage goes unpaid and can lead to foreclosure. And a tax lien is placed by the IRS in response to an unpaid income or property tax bill.

Do house liens expire?

Although the fastest and easiest way to have a lien removed from your property is to pay off the debt, some liens do have expiration dates attached to them. Once that date passes, the lien no longer restricts the property, unless the creditor renews the lien.

Also, it’s very uncommon for a tax lien to expire. It’s much more likely you’ll have to resolve the tax issue rather than have it simply disappear.

Can I buy a house with an IRS lien?

Technically, yes, though it may not be wise. You’ll likely have to pay cash for the property since lenders won’t approve a mortgage loan on a property that has liens on it. That’s because the liens will have legal priority over the mortgage loan, which means the mortgage lender would be second in line to be paid back.

What happens if I buy a house with a lien on it?

If you purchase a property with a lien on it, you’re also buying the lien, meaning that you’re now responsible for the unpaid debt it represents. If it’s a tax lien, the situation can be even stickier. The tax lien gives the government the right to foreclose on the property, sell it, and use the proceeds to satisfy the tax debt. If you purchase a house with a tax lien on it, it could be taken from you and auctioned off to satisfy the lien.

How do I find liens against my property?

If you’re worried that a property might have a lien against it, you’re in luck, liens are a matter of public record. All you need is the address or the owner’s name. Take this information to the county clerk or the assessor’s office, either in person or online, or contact a title company. These agencies will be able to quickly determine if there’s a lien on the property in question.

Can I sell a property with a lien on it?

It can be challenging to find a buyer, since properties with liens can be difficult to close on and come loaded with hassles. If you do find a buyer willing to work with you, it’s possible to go to the creditor who placed the lien and ask them to settle it so you can sell and pay them back out of the proceeds from the home sale.

A lien can be an obstacle between you and a successful home purchase, but that obstacle can be overcome with a little determination, due diligence, and, most importantly, the assistance of a seasoned real estate professional. An experienced agent has dealt with liens before and can advise you on the best way to proceed.

Clever Partner Agents are top performers in their markets and come from elite brands and brokerages. They can help you discover and settle liens, negotiate prices, and guide you through closing, as well as anything else that might come up during the buying process. If you’re ready to start your home buying journey, contact us today for a free, no-obligation consultation!

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Jamie Ayers

Jamie is the Director of Content at Clever Real Estate, the free online service that connects you with top real estate agents and helps you save thousands on commission. In the past, Jamie has managed columns for clients in a variety of leading business publications, including Forbes, Inc., CEO World, Entrepreneur, and more. At Clever, Jamie's primary goal is to provide home sellers, buyers, and investors with the information they need to successfully navigate the ins and outs of the real estate industry.

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