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Need-to-Know Facts about Tax Lien Homes



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By : Roby Hicks    99 or more times read
Do you own a house already? Do you have plans to purchase one? If you answered “yes” to either of those questions then you should certainly be familiar with tax lien homes.


Liens, Levys and Taxes

When one owes taxes to a lender, the lender can implement something called a “lien.” This is a means by which a lender uses a person's property to settle money issues when a borrower has not paid it within a reasonable period of time.

A tax lien is a specific type of lien. Usually it involves the legal right of a government to end the function of a property because the homeowner owes taxes. Such tax liens differ from levys. A tax levy refers to a government's seizing of a particular property, due to unpaid taxes. Meanwhile, a tax lien refers to both the property's seizing AND its notification.


Avoid Running When Buying

When you buy a home, try to avoid a “run with the land.” That happens when you purchase a home with a tax lien that has not been resolved. Similarly, when selling a home it is your legal responsibility to inform the buyer about debts attached to the home, such as a tax lien. This must be in writing. That is because tax lien will stay attached to the home until one has paid all taxes owed. This issue is so important that lenders usually will not issue mortgages for a property until tax liens have been settled first.


The Many Ways of Removing Tax Liens

Before removing tax liens from a house's title it is crucial to know the importance of doing as such. The reason is that they show up on your credit report. You could simply pay taxes that are owed. Another method is for a mortgage company to settle the tax lien. It will then monthly include an extra fee to your mortgage bill. After selling your home, you could also use equity in it to pay off the tax lien.


Taking out Title Insurance with a Mortgage

If you are like most homeowners, then you will secure a mortgage in order to pay for a new home.
Most homeowners cannot afford to pay cash for a home. So if you must take out a mortgage for your next home, then you will probably have to secure Title Insurance. Such cover will protect you from any issues that you didn't know about when you purchased the home, such as tax liens. A company will conduct a complete search about the property's title history.


Tax Types and Tax Liens

Tax liens can be linked to several types of taxes, including city, county, federal, income, payroll, sales, and school taxes. The most common one is the local tax lien.


Using a Title Search to Avoid a Tax Lien Home

If you want to avoid purchasing a tax lien home then you should have a title attorney or title company implement a Title Search. This involves a thorough search of legal documents to determine whether or not a house is a tax lien home. Throughout this process you can also learn about various other unwanted “encumbrances” that are attached to the house.

Before selling or buying a property, settle any tax lien issues.
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