Can I Sell My House With a Tax Lien?

• By We Buy Dallas Houses
• 26 February 2022

Tax liens are not pleasant. When the government puts a stake on your home in order to collect debts, it creates stress and complications in your life. You might wonder whether it would be better to just sell the house and settle the bill, but is that even allowed?

Yes. You can sell your house with a tax lien.

But it’s not as simple as the sale might otherwise be. The tax lien adds a wrinkle to the process, and it’s important to understand how it all works before you dive into anything. Fortunately, We Buy Dallas Houses is here to explain it all.

How Tax Liens Work 

In general, a lien is a way of matching a debt to a property. When you buy a house, the bank doesn’t own your house while you still have a mortgage (this is a common misconception). Instead, the bank puts a lien on the house. This is a legally binding arrangement that guarantees that they get their cut if you sell the house.

So if you do sell the house, you have to pay off the full remaining mortgage before you get to keep any proceeds. Additionally, you cannot sell the house for less than what remains on the mortgage (with an exception discussed a little later).

These principles apply to a tax lien as well. In this case, if you’re behind on your taxes (whether state or federal), the government can put a tax lien on your house. It means that if you sell the house, they get their cut before you get any money from the sale.

How Does the Lien Change Selling Your House?

Here’s the gist of selling a home with a tax lien. You can only sell the home if you get enough money from the sale to pay off all liens on the house. So if you still have a mortgage, that works like a lien. If there’s a tax lien too, then you have to be able to cover both of those debts.

Since the house is acting as collateral for the liens, you can’t get rid of that collateral without paying off the debt in full. That’s the major concern in this case.

Despite this limitation, there are plenty of cases where you can sell the house for enough to cover your tax lien and still have money in your pocket. Especially if your lien isn’t from long-accumulated debt.

Negotiating With Lenders

If you can’t sell the house for enough, then you are considered upside down on your home. The debt attached to the home is greater than the current market value of the house. In other words, no one is offering enough on the house to cover everything that you owe.

While this is a tough spot, there is still an option. You can negotiate with the lenders or the government to try a short-sale with the home. In this case, you sell the home for as much as you can get. You then use all of that money to pay off the liens. You don’t get any money in your pocket, but the debts are cleared in full.

Obviously, the people you owe money to get a say in this process. If they’re willing to take a loss in order to get paid now, they’ll agree to a short sale. But with a tax lien, you have to make sure all parties are satisfied. They’ll definitely set a minimum sale value that you are allowed to accept in order to make sure they get the new agreed payment.

It’s possible to get the lender, the government, or both parties to agree to a short sale, making everything a little easier for you.

Sell Your House the Easy Way

If you have a tax lien or any other reason to sell your house, we can help. We buy houses in Dallas on a regular basis, and we’re deeply familiar with the many laws and regulations tied to a home sale. We can navigate all of it and give you cash for your home.

If you want to sell your house fast, contact us today. We’ll give you a no-commitment offer so you can see all of your options.