How to Handle a Tax Lien on Your House in California
Property has Liens or Judgments
When it comes to selling your home, having a tax line or judgment can be a major impediment. When combined with facing a foreclosure, getting out from under the debt can be real problematic. Dealing with a tax lien or judgment is certainly a difficult circumstance, but not an impossible one if you understand all the factors that go into potentially selling your home to get out of this particular quandary.
It is important to understand the liens on your home, why they exist and what you can do under the circumstances.
What is a Tax Lien on the Property?
When the IRS places a tax lien on your home, then it certainly implies that you owe at least $10,000 to the federal government. There are a few reasons why you would have such a lien placed on your property.
- You still owe property taxes
- You defaulted on all home tax payments
- You have accrued large interest on the balance you owe the federal government
- You failed to fully pay legal fees and court judgments
You are given a 10 day notice before the lien is placed to reconcile the issue with the IRS. However, failing to do so will place the lien on your property.
The Impact of Having a Lien or Judgment on Your Property
Potential home buyers will generally shy away from a home that has such a lien placed on it. Furthermore, it is relatively easy for them to discover such as lien exists which means you’ll never see buyers in the first place. This action basically places your home as collateral to pay the debt which really takes away your ability to sell the property under these circumstances.
Is it Possible to Sell Your Home with a Lien?
The answer is a qualified “yes” even when using ethical practices and not duping someone to purchase your home who may not have checked first to see if there was a lien or judgment placed against it. Normally, you cannot sell your home or get mortgage refinancing unless the debt is paid in full.
However, if you can find some way to pay the tax liens on your property, then you can actually make the sale. The difference here is in the time between payment and full notification. However, there are other conditions that apply as well.
- Installment Payments
- Certificate of Discharge
The first two measures simply will not work as you still owe the IRS money that will at the very best be pulled from the sale. However, a Certificate of Discharge will allow you to sell your home without a tax lien if the IRS believes that it is in their best interest to do so.
This applies to properties that are underwater to the mortgage payments due, situations where the homeowner has verifiable constraints on their finances to pay or if the property qualifies for a short sale. Under these conditions, the IRS will often issue a Certificate of Discharge and allow you to sell the home.
If you are considering selling your home in California, then try Sell My House to get the best deals when your need to sell your property fast.