Tax Liens 101
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by: AmberDeanwater
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The most common form of tax lien is that placed on real property. Tax liens placed on real property differ from personal property tax liens in that real property tax liens attach to the home. So, if you decide to sell your home, that unpaid and delinquent tax remains with the house after the sale. The new owner will then be responsible for the payment of these overdue taxes.
The real property owner and mortgage lender will be served with a notice if taxes become delinquent on the property. A title search is invaluable if you are thinking of purchasing a piece of real estate. The existence of any tax liens will show up on a title search, thereby alerting you to the fact that there are unpaid taxes due.
Normally, tax liens will be paid out of the proceeds of a real property sale as a closing cost. If this same tax lien is not found prior to the close of the real estate sale, the new owner will be reqjuired to pay the past due taxes.
As stated above, mortgage lenders and home owners will both be served a notice regarding the real property taxes when these taxes become delinquent. When this happens, often mortgage holders will pay the taxes and then turn around and bill the home owner for the amount paid. This is done because a government tax lien takes precedence over mortgage payments so the mortgage lender often feels it needs to protect its interests.
In the event this doesn't happen, there are several different ways to make overdue tax payments in order to remove the lien from the property. The home owner can decide to pay the tax directly. Alternately, the home owner can decide to use an escrow account.
Normally, the home owner will have a length of time in which to pay the back taxes. If the taxes are not paid within this time period, the property can be seized, subsequently sold, and the proceeds used to pay the delinquent taxes.
Income tax and gift tax are examples of two types of tax which might cause a tax lien if not paid. For these types of taxes, federal law will apply. Adversely, state tax liens will be governed by that state's laws. In order not to land in the middle of this kind of situation, it is best to pay any tax when it comes due. Additionally, it is wise to order a title search for any piece of property you are thinking of purchasing.
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