How to Sell a House With Tax Liens or Back Taxes

If you've fallen behind on property taxes — or there's an IRS or state tax lien attached to your home — you might think selling is impossible. It's not. Liens are common in real estate transactions, but each payoff and release must be verified. If the property is a vacant lot or acreage, use the separate Tennessee land back-tax checklist.

The Two Kinds of Tax Liens You Might Have

• Property tax lien: When you don't pay county property taxes, the county places a lien. If unpaid long enough, the county can sell the property at a tax sale (Michigan, Tennessee, and Florida all have aggressive timelines here).
• IRS or state income tax lien: A federal or state lien for unpaid income taxes that attaches to all your property, including your home.

How Liens Get Resolved When You Sell

When sale proceeds are sufficient, the closing agent can often pay recorded mortgages and tax liens from the buyer's funds before distributing the seller's net. That is not universal: disputed liens, unrecorded claims, insufficient proceeds, federal discharge requirements, or creditor conditions can require additional documents, advance payment, or approval.

Example: Your house sells for $200,000. You owe $120,000 on the mortgage and have a $15,000 property tax lien. At closing, both get paid ($135,000 total), and you receive the remaining $65,000 (minus normal closing costs).

What If the Liens Exceed the Home's Value?

If total payoffs exceed available proceeds, an ordinary sale cannot deliver clear title without another resolution. Depending on the creditor and facts, options may include bringing funds, disputing an invalid lien, requesting a discharge or subordination, negotiating an approved payoff, or obtaining short-sale approval. A cash buyer cannot waive a government or lender lien.

The Clock Is Real — Especially With Property Taxes

County tax foreclosure timelines are unforgiving:

• Michigan: Delinquent-property-tax forfeiture and foreclosure follow statutory notices and deadlines that depend on the tax year and proceeding. Confirm the exact redemption deadline with the county treasurer.
• Tennessee: Delinquent-tax suits, sales, notice, confirmation, and redemption are governed by state law and local proceedings; do not rely on a single statewide “two-year” estimate.
• Florida: Tax certificates may be sold, and Fla. Stat. § 197.502 generally restricts a tax-deed application until two years after April 1 of the certificate's issue year, subject to statutory details.

The longer you wait, the more interest, penalties, and fees pile on — eating into your equity. Selling before the tax sale is almost always better than losing the property to the county.

Why a Cash Sale Often Makes Sense Here

When a tax deadline is bearing down, speed matters more than squeezing out the last dollar. A cash buyer can close in 7–14 days, pay off the liens directly, and get you your remaining equity before the county takes it all. That certainty is worth a lot when the alternative is forfeiting the whole house.