Sometimes satisfying debts such as property taxes or back taxes require you to sell your home, but what if that debt is attached to your home? A lien is designed to freeze the sale of your home, so it may seem impossible to pay what’s due, and you may feel helpless.
Thankfully there are options.
Selling a house with a tax lien in Nebraska to a home buyer can be one option if you’re experiencing debts owed to the Internal Revenue Service (IRS). It will require you to understand a few terms and determine the best option for your situation, but this guide can present you with a few different options along with companies that buy houses in Nebraska that should fit many lifestyles.
First, let’s learn about a few essential terms.
What Is a House in Lien?
A lien is a legal claim placed on an asset, like a house, that the lienholder can collect if the debt remains unpaid. It can be a failure to pay property taxes resulting in a federal tax lien.
Taxes are a part of the responsibility of owning a home in Nebraska, and if they are unpaid, the body owed them can collect. Lien laws allow a government body like a county or the IRS to repossess the house to recoup some of their losses.
When a house is in lien due to a failure to pay your mortgage or unpaid property taxes, it means the creditor has exhausted all their avenues to collect the debt. Now they are freezing the sale of what is most likely your greatest asset, your home, to force you to pay it.
According to tax lien law in Nebraska, the money owed must be paid as well as interest and penalties before the house can be sold or transferred.
Tax Lien Laws in Nebraska
In Nebraska, you must pay your county property taxes requested if you own a home.
If you don’t pay your property taxes in full, the county treasurer can place a lien against your home until you pay the amount owing as well as any associated interest. This lien gives them the legal right to sell your home in a tax sale to recoup the losses.
Bidders will come forward in a public or private sale and bid on the property, agreeing to pay the outstanding taxes and associated fees in exchange for the ownership or partial ownership of the home’s title. They must then wait three years before they can acquire the home.
It is crucial to pay county tax amounts on time and in full or make arrangements if that’s not possible. However, with a home sold in a tax sale, there is still hope to regain ownership because, unlike other states, Nebraska gives the original homeowner a chance to “redeem” their property after another person has purchased it in a tax sale.
Within the redemption period, which is the three years after the tax sale, as the original owner of the home, you can pay all due taxes, interest, and fees and file the appropriate paperwork to redeem or regain ownership of your home.
What Are Real Estate Taxes in Nebraska?
Real estate taxes, also known as real property taxes or just property taxes, are calculated by the home location’s local government.
Different areas of Nebraska have different property tax amounts. However, they are all usually a set percentage of the appraised value of the home and the associated properties attached to it. Property taxes pay into the community, and they’re an important part of homeownership.
Local governments use this money to fund the common services that benefit all the residents of that community. These services include:
- Improvements to local sewer and water infrastructure
- Funding law enforcement and community policing
- Public school services
- Fire departments
- Upgrades and maintenance to roads and highways.
Can You Sell a House in Tax Lien in Nebraska?
Whether you’re looking for someone to buy your house in Bellevue or Omaha, it is possible to sell a house with a tax lien. The tax lien will need to be settled before the home’s sale is complete for you to receive equity from the home. Also, the potential buyer can easily discover the tax lien through a title search, which may hinder the sale.
The tax lien needs to be dealt with as soon as possible and will require the help of professionals to ensure the money goes to the appropriate agencies and all liens, penalties, and interest are paid in full. Though it’s possible to sell your house without a realtor, speaking with one could utilize their expertise rather than hiding it from the sale.
How to Sell a House With a Tax Lien
Here are five methods to legally satisfy a tax lien in Nebraska while selling your home.
1. Dispute the tax lien with the IRS or other relevant body
If you believe the tax lien is in error or you’ve already paid the debt, then you have the right to dispute the lien with the IRS. While this method doesn’t often lead to forgiveness of the debt and requires paperwork as well as a tax professional, it is a logical step.
The IRS will most likely not speak to you or your real estate agent directly, they will wish to talk to a tax advisor. Hire a professional tax advisor at this point before pursuing this method.
2. Satisfy the debt upfront
Paying the debt does seem like the logical step if you owe the property taxes. If the amount is higher than the cash you have access to, it may not be that simple.
Acquiring another loan to pay off this debt may not seem like a good idea, but securing a line of home equity or a small loan with a vehicle as collateral could be enough to pay the lien. Then, use the equity from selling the home to start fresh again and begin paying down the new debt.
3. Request and obtain a certificate of discharge
A certificate of discharge acquired from the IRS is a way to sell your home that has a tax lien attached and obtain the equity so you can then pay back the lien. If the IRS approves the certificate, it releases or discharges you from the property, but the lien still stays with your name.
You must fill out paperwork before obtaining a certificate that names a new purchaser or transferee of the property. If the certificate is approved, it will break it from you and transfer the title to someone else. Then pay back the lien in full. This way, you can use the proceeds from the sale of the house rather than acquiring a loan.
4. Pay off the debt at the time of closing
There is the option for debt to be paid from the proceeds of the home at the time of closing, but timing is everything, whether you’re selling a house online or with a traditional sale.
After repaying the debt, the necessary paperwork is filed before the home sale is closed, including the lien release from the IRS.
The transfer of funds from the new buyer to the seller is taken care of by the attorney who distributes the funds according to both parties’ wishes. Money is taken out of your portion and sent to the IRS. If all the parties maintain tight deadlines, you can pay the lien before the title changes hands.
5. Wait until the debt expires
This is the least desirable option on the list.
Tax liens have a 10-year statute of limitations after which they expire, and the debt is no longer on file and you are no longer responsible for it. It is not that simple, unfortunately.
A small amount may not be worth the IRS’s time to bring you to court, but there is every chance that they will pursue it, and you, regardless of the amount. The 10-years statute is also not as simple as 10-years. A five-year continuation statement can be filed and presented to continue the debt past the initial ten years.
It’s in the county’s and IRS’s best interest to collect on that debt, and they are unlikely to simply let them expire. Instead, the lien will continue to gather interest and additional penalties until it is paid or they act upon the lien.
If you don’t pay your debts, the IRS can also seek a judgment through the courts by filing a suit. The judge will most likely reduce the amount for the final decision, but the statute of limitations will no longer apply, and you will find yourself compelled to pay the amount or risk further legal trouble.
Selling your home that has a tax lien on it because of unpaid property taxes can be an option to obtain the funds necessary to pay your debt.
The essential points to remember are:
- Be honest with the purchaser and real estate agent about the lien
- Act quickly
- Hire professionals
- Pay the tax lien
- Obtain a tax advisor to work with the IRS
If you’re interested in selling your home quickly without hassle, we buy homes in Hickman with a fair cash offer. If you want to cut out the stress and move on to the next chapter of your life, contact us to sell your home fast.