Completing a Real-Estate Mortgage Transaction When Subject to a Tax Lien: Part II

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Selling a Mortgaged Property When Subject to a Tax Lien

Life goes on, even when you are subject to an IRS or other state or local tax authority’s lien or have a tax lien against your real property. At least, you need and want life to go on despite the tax lien. And those personal needs or desires of yours may include selling your mortgaged residence or other real property, whether to move, upsize, or downsize, or simply to cash in the equity for other purposes. A tax lien shouldn’t put a complete hold on your life.

A Priority Problem. Tax liens, though, are effective precisely because they require the alleged tax debtor to reckon with them rather than ignore the alleged tax debt that the lien secures. A lien generally requires the parties involved in a sale, meaning the buyer, lenders, escrow agent, and you, to recognize a tax lien’s validity and priority, whatever that validity and priority may be. A buyer, buyer’s lender, and escrow agent cannot simply hand you and your mortgage lender the sale proceeds without first dealing with the tax lien, or they may be liable, too.

A Proceeds Problem. The other problem with selling a mortgaged property with a tax lien on it is that, depending on the lien’s validity and priority, you and your lender may not receive the proceeds you expect from the sale. You may have negotiated a sale price you expect to pay off your mortgage balance and to leave you with a certain amount of money left over. But once your closing agent factors in the lien, there may not be as much cash available as you hoped.

The Sale Solution. Just because you have a tax lien to deal with doesn’t mean that you’re stuck without a sale. If you need information and options to help your sale go through, then contact the Enrolled Agents at Highland Tax Group to help you investigate and achieve one of these potential solutions:

  • prove to the IRS or other tax authority that you do not owe the lien or that you qualify for fresh-start or hardship relief, requiring that they withdraw it to permit the sale;
  • negotiate a fixed, firm, and clear reduction in the tax-lien amount through an offer in compromise, penalty abatement, and other advocated relief, so that you know your sale proceeds will work for you;
  • ensure that the IRS, lenders, and escrow agent agree that the lien is subordinate to your mortgage so that your sale proceeds go first to pay off your mortgage loan.

The Enrolled Agents at Highland Tax Group offer all of the above tax-resolution services to help you sell your mortgaged real property even when subject to a tax lien. Don’t put your whole life on hold just because of a tax lien. Let us do the hard work of handling all the IRS communications and conferences. Our clients believe in us, just as you should, too. Contact us now online or toll-free at 888-738-8182.