Yes, you can sell your house with delinquent property taxes. The usual thumb rule is to clear the taxes from the sale money as there is no obligation to pay them before listing the home. Instead, this approach may help you when you are going through a financial strain. Just make sure to get enough equity in the home to cover them when the sale goes through.
Truth be told, it’s not just a handful of homeowners facing this challenge. In interesting statistics, the National Tax Lien Association highlighted Americans owe over $21 billion in unpaid property taxes every year. This includes regular homeowners, especially people who lost jobs, went through a divorce, had medical emergencies, or inherited a home they weren’t ready for. Are you one of them and want to sell your property burdened by back taxes? You’ve reached the right guide.
So what happens when you stop paying property taxes?
If you are not paying property taxes on time, the government is likely to place a lien on your home. In case the debt remains unpaid, the risk of foreclosure increases. A situation like this usually goes through several stages before it reaches foreclosure.
Let’s assume you owe $3000 in property taxes because you lost your job or due to financial constraints and you have stopped paying property taxes. In this case, the county may first add penalties and interest. If the debt remains unpaid, they will place a tax lien on your home.
In some states, homeowners choose to sell their debt to a private investor. But then the investor will start collecting it from you, often with higher interest later. It is suggested to utilize the time to address unpaid taxes before foreclosure becomes a possibility.
Good News is That a Tax Lien Doesn’t Stop You From Selling Your Home!
Yes, you can sell your house with unpaid property taxes even if it has a tax lien. You can list the home and find a suitable buyer. The title company or a real estate attorney (in some states) does a title search and finds the lien. Then the closing attorney contacts whoever holds the lien, gets the exact payoff number, and pays it from your proceeds right there. Buyers then get a clean title, and you get whatever is left after the lien. This may be a great way to protect your equity.
In Bell v. Pappas, a federal court ruled that the country’s tax sale system in Cook County was unconstitutional because homeowners were losing homes and all their equity over tax debts far smaller than what the home was worth. That’s what happens when nothing gets done. Which is why acting before a foreclosure happens may help you preserve the value of your home.
Ways to price and list your home with delinquent property taxes
Your goal shouldn’t be only to sell your home but instead to sell it at a price where the tax payoff feels like a normal cost to you. Usually, well-listed homes that end up attracting strong offers can make even a $14,000 tax lien feel like a rounding error. Whereas, a poorly priced listing can make a $6000 lien feel like a crisis.
Know what you owe:
Focus on getting an official payoff statement before you price your home. This should include taxes, penalties, interest, and fees. This way, you’ll know the minimum amount you need from the sale.
Price it Right
Do a little research and price your home based on recent comparable sales. Try not to overprice it because this may repel buyers, and in the end, you may have to settle for a lower price.
Improve Buyer Appeal
Make your house appealing to the buyer. Focus on cleaning, decluttering, minor repairs, and the curb appeal of the house. Sometimes, a well-presented home may attract more buyers and get you stronger offers.
Even simple improvements can make a difference. Consider reviewing what should I consider before selling my house to prepare for a successful sale.
Disclose the Lien to your agent
Transparency goes a long way. Thus, letting your agent know about the lien so that the sale is structured correctly is a good idea. You may not need to highlight it in the listing itself.
Choose the Right Timing
Try listing the house during peak buying seasons such as during spring or early summer. You’d be happy to know that more buyer activity may lead to better offers and a faster sale.
One thing to watch out for is if you’re planning to buy another home at the same time you’re selling your current house, bad timing can leave you stuck with two mortgages. Learn how to avoid paying two mortgages when moving in our guide, so you don’t get caught in that situation.
Practical tips for homeowners with unpaid property taxes
Get the tax payoff in writing before you list your house.
Confirm who actually owns the house.
Ask whether you qualify for a payment plan.
Check if your state offers a tax deferral program.
Calculate your net proceeds before setting a price.
Get your property reviewed by a title company.
What to do if tax foreclosure is happening?
People try to sell their house before tax foreclosure because once it happens, it may take away your ability to decide how it gets sold and what you keep. Let’s assume you are a retired couple in Florida and you fell behind on property taxes. You faced a tax deed sale and took the initiative to contact a real estate attorney early. Hence, you were able to list and sell the home, pay off the lien, and keep the remaining equity.
In case the foreclosure proceedings have already started, try acting quickly. Give your county’s delinquent tax office a call, learn about hardship referrals or payment plans that may pause the process when you decide to sell your home. Try speaking with a real estate attorney who handles tax cases. In most states, a signed purchase agreement or completed sale can stop foreclosure. If you wait too long, it may limit your options and increase the amount you owe.
What does the buyer do with back taxes?
Your buyer would want a clean title especially, if they are using a mortgage. This is because their lender won’t approve a loan with an unresolved lien. Sale proceedings usually help with paying off the lien at closings, and then the title company is able to handle the process.
Cash Buyers and investors are more comfortable with lien situations. They need to move fast with the process. However, prices can differ on the basis of their evaluation of the local market. Whether you sell your home to an investor or list it traditionally, the lien cannot be ignored. Thus, it requires your attention before the sale is completed.
Compare which Option best works for you
| What You Can Do | When It Makes Sense | What Happens |
| Pay the taxes before listing | You have money saved or can borrow against the home | Cleanest path with no lien issues at closing |
| Let the sale pay the taxes | You have enough home equity | Most common, here the title company handles it at closing |
| Set up a payment plan with the county | You’re close to foreclosure and need more time | Slows the process down so you can sell properly |
| Apply for a state deferral program | You’re a senior, disabled, or have low income | Taxes get collected when the home sells later |
| Sell to a cash buyer | You need to sell fast or don’t have much equity | Quicker closing but usually a lower price |
| Short sale | You owe more than the home is worth | Your lender takes less than owed and this can affect your credit |
How does it work in different states?
Property tax law is local, and it can matter the most in the following states:
Illinois: If you are in the Chicago area and taxes have been unpaid for more than a year, your lien is likely already in private hands.
Texas: Here, property taxes are high because there’s no state income tax, and so is the foreclosure timeline. If you miss taxes for two years, it may cost you your property.
Florida: When your taxes go unpaid, the county sells a certificate to investors. If it is still not paid within 2 years, the investors can apply for a tax deed and force an auction.
California: Homeowners get longer timelines and stronger protections. However, delaying tax payments longer may bring problems.
Quick Summary
So, yes, homeowners can sell a house with delinquent property taxes, and even if a tax lien has been placed on the property. The lien is paid off from the sale proceeds, and the title company ensures the buyer receives a clear title. Thus, selling before a tax foreclosure situation can help you preserve your equity, avoid additional penalties, and may give you more control over the sale process.
If you want to make a home sale with unpaid property taxes, try exploring your options with Prudent Home Buyers and decide what best suits you.
FAQ’s
Q1. Can I sell my house for cash if I haven’t paid property taxes?
Yes, cash home buyers are ready to take your home even if you haven’t paid property taxes.
Q2. What if I can’t pay the taxes before closing?
Usually, people are able to pay the taxes once the home is sold.
Q3. Having a tax lien on my property hurt my credit score?
Tax liens don’t appear on credit reports these days.
Q4. Can I sell my house even if the foreclosure has occurred?
Yes, you can still sell your house if the foreclosure hasn’t been completed.
Q5. What’s the difference between a tax lien and a tax deed?
A tax lien is a claim against your property for unpaid taxes. A tax deed transfers ownership from you to someone else.
Q6. Do I need a real estate agent, or is an agent enough?
Homeowners can benefit from both when tax issues are involved.