Can you sell a house with back taxes?

Can you sell a house with back taxes? The short answer

Yes, you can sell a house with back taxes in nearly every situation. Property taxes are a lien on the home, which means the debt is attached to the property itself. A buyer's title company won't close until that lien is paid, so the payoff comes out of your proceeds at closing, the same way your mortgage does.

The catch is equity. If the sale price covers the mortgage, the back taxes, penalties and your closing costs, the sale works smoothly. If it doesn't, you'd need to bring money to closing or negotiate with your lender. Selling sooner, before interest and penalties grow, keeps more equity on your side.

Current-year taxes are handled separately. In most sales, the year's property taxes are prorated between buyer and seller on the settlement statement, so each side pays for the part of the year they own the house. Delinquent amounts from earlier years are entirely the seller's responsibility.

What is delinquent property tax?

Property tax becomes delinquent when it isn't paid by the due date your county or city sets. From that point, most places add penalties and interest, and the unpaid amount stays attached to the property as a tax lien. Each state sets its own schedule, rates and remedies.

Back taxes build up for ordinary reasons. A mortgage gets paid off and the escrow account that used to pay the taxes goes away. A job loss or medical bills push the tax bill down the list. An owner dies and the bills go unopened. A reassessment or a lost exemption raises the bill more than expected. None of it is unusual, and none of it stops you from selling.

In most places, property tax liens take priority over other liens, including mortgages. That's why lenders care so much about property taxes and why many loans include an escrow account that pays them for you. If your lender pays delinquent taxes to protect its interest, it will usually add the amount to your loan or your escrow payments.

What happens if back taxes stay unpaid

If back taxes go unpaid long enough, the taxing authority can move to collect them by selling either a tax lien certificate or the property itself at a tax sale. Which method your state uses, how long it takes, and whether you have a right to redeem the property afterward all depend on state law.

Selling before a tax sale is almost always better for the owner. A tax sale can wipe out much of your equity and adds fees on top of the tax owed. If you've received a notice of a tax sale, act quickly: call the county tax office, read the notice for deadlines, and consider talking with a real estate attorney or a HUD-approved housing counselor.

Don't ignore mail from the tax office, even if you can't pay right away. The notices tell you how much is owed, the deadlines that apply and often the options available, like payment plans. Knowing the date of a scheduled tax sale is what lets you plan a sale of your own before it.

How back taxes are paid when you sell a house

When you accept an offer, the title or escrow company runs a title search. Delinquent taxes show up as a lien. The title company requests a payoff figure from the county that's good through the closing date, including penalties and interest, and lists it on the settlement statement.

At closing, the proceeds pay off liens in order: property taxes, the mortgage, any other liens or judgments, then closing costs. What remains comes to you. Ask for an estimated settlement statement in advance so you can see the payoff before you sign.

Back taxes aren't always the only government charge on a property. Unpaid water or sewer bills, special assessments, code enforcement fines and demolition or board-up charges can also become liens in many places. The title search should find them, and they're generally paid the same way. If you know about any of these, mention them early so they don't surprise you at closing.

How to pay delinquent property tax if you want to keep the house

If you'd rather keep the house, start with your county treasurer or tax collector's office. Most counties let you look up your balance online and pay online, by mail or in person.

• Get the full payoff amount, including penalties and interest, and the date it's good through
• Ask whether an installment or payment plan is available
• Ask about exemptions you may qualify for, such as homestead, senior, veteran or disability
• If you have a mortgage, ask your servicer whether it will pay and add the amount to escrow
• Get written confirmation once you've paid

Can I pay delinquent property taxes in installments?

Many counties offer installment plans for delinquent property taxes, and some states require them in certain cases. Terms vary: some plans stop new penalties while you pay, others don't, and missing a payment can cancel the plan. Ask for the terms in writing.

If you can't afford the plan or the ongoing tax bill, that's important information. Keeping a house you can't afford to tax and insure usually leads back to the same problem. A HUD-approved housing counselor can help you weigh keeping versus selling at no cost.

Your options to sell a house with back taxes

Choose the path based on how much equity you have and how close you are to a tax sale. If a sale date is near, the time a listing takes, plus a financed buyer's closing timeline, may not fit. If you have months and the house shows well, listing can net more. If you owe more in taxes and loans than the house is worth, talk with your lender and a HUD-approved counselor before you choose any path.

• List with an agent: can bring the highest price if the house is in good condition and you have time before a tax sale
• Sell as-is to a cash buyer: a predictable closing date, no repairs, and the taxes paid from proceeds
• Pay the taxes and keep the house: works if you can afford the payoff and future bills

Back taxes and your mortgage lender

If you have a mortgage, your lender has a strong interest in the property taxes because a tax lien can come ahead of its loan. Many mortgages let the lender pay delinquent taxes to protect its position and then add the amount to your balance or set up an escrow account. Some loan documents treat unpaid taxes as a default.

If you're behind on taxes and the mortgage, call your servicer before the situation grows. Ask what it has paid, what you owe and what options it offers. Keep notes of every call. When you sell, both the lender's payoff and any remaining back taxes are settled at closing.

Back taxes on inherited or vacant houses

Back taxes are common on inherited and vacant houses. Bills keep going to an owner who has died, or to an address no one checks, and exemptions the owner had may end. If you've inherited a house, check the county's tax records right away. The estate or the heirs will need to deal with any delinquency, and the house can't be sold with clear title until it's paid, usually at closing.

If the taxes are years behind, ask the county whether a tax sale is scheduled or has already happened. Some states give the former owner or heirs a period to redeem after a sale; others don't. A probate or real estate attorney can tell you where you stand.

Can you sell a house with back taxes to Prominent?

Yes. Prominent Cash Offer buys houses directly, as-is, in any condition, including houses behind on property taxes. If the property is a fit, you'll get a written cash offer with the terms spelled out. The back taxes, penalties and your mortgage are paid from the proceeds at closing through the title company. There are no fees or commissions, we pay the closing costs, and you choose the closing date. There's no obligation to accept.