Can I Buy a House With a Tax Lien?

In case you have money to cover the home, then there are not any restrictions on what home you can purchase from someone else. But, you will purchase the property subject to the tax lien which carries substantial risk of loss. If, on the other hand, you will obtain financing to purchase the property then you will most likely not be able to purchase a house with a tax lien on it.

History

A tax lien usually means the person who owns the property has not paid some form of tax, so the government entity has filed a lien against the taxpayer’s property. When the lien attaches, it may be removed only by the government entity, and typically the only way the government entity will remove the tax lien is through full payment of the delinquent taxes, plus interest and penalties.

Significance

A tax lien gives the government entity the right to foreclose on your property. In other words, the government entity can force the sale of the house and use the money got to repay the tax lien. It does not matter who owns the house at the time the government agency institutes foreclosure. Consequently, if you get a home with a tax lien on it, there’s a considerable risk that you may lose the house in a foreclosure sale.

Money Purchase

When you purchase a house with cash, you create all the rules and also the huge decisions. If you want to to purchase the house together with the tax lien attached, then there’s nothing to legally stop you. Remember, though, the one thing you’ll be able to purchase is the prior owner’s directly to the house, which means you step into the shoes of the previous owner. Hence, the tax lien stays attached to the property even if the delinquent taxpayer, the prior owner, no longer owns the property.

Financing

Should you require financing, but to purchase the house, then you will most likely not be able to purchase as long as the tax lien is connected to the home. Most mortgage lenders require a first lien position on the home, and a tax lien will possess first lien priority over the new home mortgage. Thus, your mortgage lender will probably need somebody to cover the taxes and possess the tax lien eliminated before it is going to give you a home mortgage on the home.

Title Insurance

Another issue with purchasing a home subject to a tax lien is that you may not be able to obtain title insurance on the house. Title insurance is a typical purchase for homeowners since it protects the purchaser’s title to the house. Most title insurance companies are cautious of tax exemptions and won’t issue a homeowner’s policy before the tax lien vanishes.

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