Tax, Deed & Foreclosure

Your property can be foreclosed upon or levied for nonpayment of taxes

You can lose the deed to your property by levy for unpaid U.S. federal taxes or by foreclosure for unpaid local property taxes. To avoid this, it's important to understand the consequences of nonpayment and stay on top of your taxes.

Consequences of Non-Payment of Property Taxes

Depending your state law, a local government can sell your deed in a tax deed sale or obtain a claim to your property called a tax lien due to unpaid property taxes. It can then sell the lien to another person who will profit from the difference between the amount of arrears, interest and penalties you must pay to remove the lien and the amount he paid to purchase it. Under certain circumstances, the lienholder can foreclose on your property.

Consequences of Federal Tax Liens

The IRS can collect your federal tax debt by issuing a tax lien and, if you don't pay to remove the lien, levying or legally seizing your property. To avoid a federal tax lien, pay or enter into a payment agreement or offer in compromise within ten days of receiving an IRS Notice and Demand for Payment. You cannot sell or refinance your home with a federal tax lien unless the IRS agrees to subordinate it, or give another lender priority when collecting your debt.

Special Precautions for Short Sales

You may be responsible for a previous owner's liens if you purchase through a short sale. Experienced advice, a thorough title search and owner's title insurance can protect you against losses due to title defects like liens that the seller didn't disclose at or before closing.

References

• Nolo: Lien
• NetroOnline: Tax Lien Sales
• Bankrate: Unpaid Liens Can Ruin a Short Sale
• Bankrate: Buying a Home in a Tax Lien Sale
• IRS: What If There Is a Federal Tax Lien on My Home?