The world of real estate can be both complex and nuanced. Even more so when other complications such as tax liens are involved in the sales process.
If you have a tax lien on your house, you likely have questions such as:
- What a tax lien is
- If the amount owed be added to the closing price
- Whether or not the lien must be paid off at closing
- If it is even possible to sell a house if back taxes are owed
This guide will help walk you through some of these concerns and questions.
NOTE: Bear in mind we are neither tax advisors nor attorneys. Nothing in this guide is to be construed as legal or tax advice and is for informational purposes only.
What Is A Tax Lien And Can I Sell My Phoenix Home If There Is One Placed On The Property?
A tax lien is a claim placed by the government against your property. This claim is made if you fail to pay your taxes, and can be either federal or state-imposed. According to the IRS, those with federally imposed tax liens must pay down their delinquent amount PRIOR to selling or refinancing their home.
However, there is “some” good news. There is one circumstance under which you may you’re your Phoenix property even if it has a federal tax lien attached to it. To do so, the lien must be greater in value than the amount of equity in the home. In this case you may sell the home by obtaining what is known as a “certificate of discharge”.
This process is more detailed than the scope of this short guide, but to get you started, there are two provisions you will likely want to use to your advantage when dealing with the IRS:
- Provision #1: IRC § 6325(b)(2)(A)
- Provision #2: IRC § 6325(b) (2) (B)
In circumstances where a certificate of discharge is required, seeking out the assistance of a tax professional or attorney is generally advisable.
Resolving Tax Liens To Sell Your Phoenix House
Generally speaking, the IRS does not settle on property liens until a specific amount of tax debt has been reached (often $5000). Although paying a debt in full is the surest fire way to resolve a tax lien, the IRS may be swayed to withdraw the lien pursuant to the provisions above and negotiations that may include some form of partial repayment, an agreed-to payment plan or the sale of your home in Arizona. In these cases it may be possible to have the lien removed without full resolution of the debt itself.
What If Your House Sells For Less Than What Is Owed On The Lien?
Requesting a discharge of the amount owed state-imposed allow the sale of your home is the first step to taking care of your debt. But what if the sale price isn’t enough to cover the total liability of your lien?
We all want top dollar for our homes, but that doesn’t mean we’ll get it, or that it’ll be enough. In the event that the sale price is not sufficient to cover both the mortgage (if one exists) and the tax lien in full, the IRS has what is known as “Direct Debit Installment Agreement Programs” or DDIA for short. These programs, if approved, make it easier for homeowners to have their lien withdrawals granted upon payment.
If your property has a tax lien on it, selling your Phoenix, AZ home may require some additional hurdles. Speaking with a tax professional and/or attorney familiar with liens and tax laws is a good first step to understanding your options.
At We Buy Phoenix Houses Fast, we’ve helped countless local area residents get out from under the crippling debt of a tax lien. If you are searching for a “we buy houses” company that can purchase your distressed property for cash, then call (602) 903-1792 to learn more about how we can help.