Tax debt can sometimes feel even more daunting than other kinds of debt. That’s because the government is unforgiving and the timeline of tax repayment is fairly unmovable. If you need to sell your house with a tax lien in Charlotte, NC, then you have options!
Though it’s natural to feel overwhelmed, the process of selling your home when you face a tax liability is not impossible. In fact, your home is your most valuable asset. Selling a house with a tax lien can be the key to getting out from under crushing debt and starting over.
Types of tax debt
There are lots of different kinds of tax debt.
- Unpaid property taxes
- Behind on child support
- Outstanding income tax
- Large business tax debts
- Court judgment
People who are under the crunch of tax debt, whether it’s local county taxes or federal taxes, aren’t without recourse. The best course of action is to face the problem head-on. Otherwise, tax penalties and interest can raise the amount you owe in tax debt.
Whatever your path to getting into tax debt, there is always a way to attack the problem.
How does a home tax lien work?
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Delinquent tax burdens can quickly roll over, causing the government to put a tax lien on your home. A home tax lien can affect the path that you take to sell your home in Charlotte, but it doesn’t prevent you from selling your home.
A tax lien is just a claim for money against your assets. This can be against any kind of asset, but the home is the largest piece of property that most people own. That’s why the government is most likely to come for your house if you have significant back taxes.
A homeowner with a tax lien cannot pocket the equity from a house sale before paying the government. They are free to sell the property, but they have to pay the government first. This is true of any kind of tax lien. The three possibilities are:
- Federal tax lien – a person has unpaid income taxes and so the United States federal government comes for their assets through the IRS
- State tax lien – a person has unpaid back taxes owed to the State of North Carolina through the North Carolina Department of Revenue (NCDOR)
- Property tax lien – a person has unpaid property taxes that are owed to Mecklenberg County or the City of Charlotte.
Who handles a Charlotte tax lien?
Homeowners in Charlotte who want to know how to sell your house with a tax lien have to consider what kind of tax they owe. Though the government that the taxes are owed to is usually who the property owner will work with, there are times when a private entity gets involved. This is most common with a property tax lien through the City of Charlotte or Mecklenburg County.
A tax lien certificate from the city government or the county government can be sold to outside investors. If a Charlotte homeowner doesn’t take charge and pay off the tax lien, then the first thing that will happen is there will be additional interest and fees tacked onto the debt. After that, if the homeowner still doesn’t take care of the debt, the private investor can foreclose on your home.
A private investor isn’t always a bad thing for Charlotte homeowners. These individuals are often more flexible than the government. You might be able to negotiate a timeline or even scale down the amount owed on a tax lien.
The IRS, the North Carolina Department of Revenue, the City of Charlotte, and the Mecklenberg County Government are all able to foreclose on your home. If a tax lien isn’t paid in full within their timeline, there’s not much to stop the wheels. If you don’t want to have the government foreclose due to tax debt, you will want to negotiate quickly. That’s if your tax lien is with a private investor or with a government agency.
How to pay off a tax lien
Sometimes the only way to pay off a tax lien is to sell your home. If you can pay off your lien with cash from savings or through a personal loan, well that’s great! Some people talk to family to try to get a family loan to pay off tax debt. It’s worth it to take on a side hustle or a second job for a few months to get out from under a tax burden too.
If none of these are options for you, you can put your house on the market as fast as possible to stop ongoing penalties. Otherwise, you could shrink your home equity significantly. A fast sell with a cash buyer might well save you more money than if you wait for a real estate agent to sell the home for a higher price. Compounding fees on a tax lien will eat into your home equity and take out any profit that you might make selling your home for a higher price.
Are tax liens discoverable in a title search?
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Yes. If you have a tax lien on your home, it’s going to show up in the title search. Any buyer, whether it’s through a traditional mortgage company and a real estate agent or with a fast cash buyer is going to do a title search.
The North Carolina Property Records search will uncover a Mecklenberg tax lien on a property. The Mecklenberg County lien index will show all claims against the equity in a property. Even if it’s not an exact match for the name on the home’s title, a tax lien will show up.
Don’t try to hide your tax lien from potential buyers. This will only slow down the sale process. Instead, work with a real estate attorney or a tax attorney to sort out your problem. If you have a low cash flow or are underwater with your loan, this can be embarrassing. This is the moment to swallow your pride so that you can sell your house. Simple tax liens can be handled quickly, but a complex tax lien might take more time and effort. Either way, always disclose this information to potential buyers.
Sell your house with a tax lien
You can’t transfer a tax lien by selling your house in Charlotte, NC. This is an issue that has to be resolved before a home sale can close. That’s worth repeating – you have to settle a tax lien before you can sell your house.
There are ways to get rid of a tax lien without paying the government.
- Dispute a tax lien with the government. This process isn’t easy, but it does work in some cases. Maybe the tax lien was filed in error or you don’t own the property.
- Ask for a certificate of discharge from the IRS. There are some special cases where a federal tax lien can be discharged without resolving the tax debt. You’ll still have to pay it, but this removes the IRS tax lien from the house so that it can be sold.
- Use your home equity. You might be able to pay the lien off with a home equity line of credit (HELOC) prior to closing, but that only works if you have a lot of equity in the home.
- Wait it out for a decade. This is an option in rare cases. After ten years, the statute of limitations on tax debt expires. If you’re close to the decade mark on your home tax lien, it might be worth your while to wait it out. Know that the IRS has ways around this if a debt is big enough to be worth their time. If the IRS files a tax suit against you in court, that tax judgment never expires.
You cannot pay off delinquent taxes with the proceeds from the sale of a house after the closing. It’s sometimes possible to pay off a tax lien at closing. You’ll need to consult with a real estate attorney about the process. This might delay closing, but it can be a workaround.
Don’t give up when you want to sell your house
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No matter what you do, don’t give up on selling a house with a tax lien. State tax liens or even a mortgage lien can be taken care of through a direct debit installment agreement. Unpaid income taxes owed must come before other creditors. Taxpayer requests to a state’s department of revenue can result in partial payment, and if you’re proactive then a lien holder will potentially work with you on a lien release.
Though IRS claims on your home can be emotionally bankrupting when you don’t have enough equity in your home to cover a lien discharge, that doesn’t mean hope is lost. Even if you have other debts that you need to pay and don’t have enough money on hand to take care of a specific lien right now, you still have recourse! Educate yourself on your property and talk to a tax advisor. You can sell your house, even if you have a heavy tax burden.