Few financial burdens weigh as heavily on a homeowner as delinquent property taxes. The notices start as friendly reminders, then escalate to stern warnings, and eventually, the threat of a tax lien or foreclosure auction looms over your head. If you are in this position, you might feel trapped, wondering if you are even allowed to list your property for sale while owing money to the county.
The short answer is yes, you can sell a house with back taxes. In fact, selling the property is often the most effective way to satisfy the debt and protect your financial future. However, the process requires transparency, strategic planning, and a clear understanding of how the proceeds from your sale will be distributed.
This guide serves as your roadmap. We will navigate the complexities of tax liens, explore your selling options, and outline the exact steps to transition from a delinquent status to a debt-free sale.
Can You Sell a House with Back Taxes?
Selling a home with unpaid property taxes is not only possible; it is a common real estate transaction. When you sell a property, the goal is to transfer a “clean title” to the new buyer. A clean title means the property is free of encumbrances, such as mortgage debt, contractor liens, or government tax liens.
You do not necessarily need to pay the taxes before you list the home. Instead, the money you owe is typically deducted from the profit you make on the sale. The title company or closing attorney handles this distribution, sending the required funds directly to the county tax collector before giving you the remaining balance.
Understanding the Stakes: Tax Liens and Sales
Before rushing to market, it is critical to understand what happens if delinquent taxes are left unaddressed. When property taxes go unpaid, the local taxing authority (usually the county) has the right to place a tax lien on your home. This is a public legal claim against your property that prevents you from refinancing or selling without first paying off the debt.
If the taxes remain unpaid for a specific statutory period (which varies by state), the county may move to foreclose on the lien. This can result in a tax deed sale, where your home is auctioned off to the highest bidder to recover the owed taxes. Selling your home voluntarily before this auction occurs is almost always the better option, as it allows you to control the sale price and potentially walk away with equity.
Your 3 Main Options for Selling
Depending on your financial situation and the timeline you are working with, you generally have three paths to sell a home with back taxes.
1. Pay Off Taxes Before Listing
If you have cash reserves, paying the delinquent amount before putting the house on the market is the cleanest approach. It removes the lien immediately, preventing any “red flags” from appearing during a buyer’s title search. A clean title can make your home more attractive to traditional buyers who might be wary of complicated closing processes.
2. Pay from Proceeds at Closing
This is the most common method for homeowners facing financial difficulty. You list the home as you normally would. Once you accept an offer, the closing agent requests a “payoff statement” from the tax collector.
At the closing table, the funds from the buyer are used to pay off your mortgage (if any), closing costs, and the back taxes. You receive whatever net proceeds remain. This option allows you to sell without coming out of pocket for the taxes upfront.
3. Sell “As-Is” to a Real Estate Investor
If your home requires repairs in addition to having tax issues, or if a tax auction date is rapidly approaching, a traditional listing might take too long. Retail buyers often struggle to get financing for homes with physical distress or complex title issues.
In these scenarios, selling to a cash buyer or a professional investment firm is often the best solution. These buyers purchase properties “as-is,” meaning you do not need to fix the roof or paint the walls.
They are also experienced in handling title issues like tax liens. For example, you can read more about SleeveUp Homes in our guide to understanding how cash buyers can expedite the closing process, often settling the deal in as little as seven days. This speed is vital if you are racing against a foreclosure clock.
Step-by-Step Roadmap to the Sale
Ready to move forward? Follow these steps to ensure a smooth transaction.
Step 1: Know Your Exact Numbers
Do not guess how much you owe. Interest and penalties on delinquent taxes can accrue daily. Contact your county treasurer or tax collector’s office and request a written payoff quote. This document will tell you the exact amount required to clear the lien through a specific date. You need this number to calculate your estimated net proceeds.
Step 2: Check Your Equity
Subtract your mortgage payoff balance and the total back taxes from your estimated sale price. If the result is positive, you have equity, and a standard sale will work fine. If the result is negative (you owe more than the home is worth), you may need to negotiate a short sale with your lender, which is a more complex process requiring bank approval.
Step 3: Be Transparent with Buyers
If you are listing on the open market, honesty is the best policy. While you do not always have to advertise the tax lien in the listing description, you must disclose it in the seller disclosure documents required by your state. Attempting to hide a lien will only cause the deal to fall apart when the title company discovers it later.
Step 4: Prorate Taxes at Closing
Remember that you are also responsible for the property taxes for the current year up until the day you close. The closing agent will calculate a proration. For example, if you sell on June 30th, you owe taxes for the first six months of the year. This amount will be charged to you at closing in addition to the back taxes.
Conclusion
Facing delinquent property taxes is stressful, but it does not mean you have lost your home or your equity. The real estate market provides structured ways to settle these debts through a sale, allowing you to move forward with a clean slate.
Whether you choose to list with an agent and pay at closing, or sell quickly to a cash investor to avoid an auction, the key is to act now. The longer you wait, the higher the penalties rise—so take control of the situation today.
