Classic craftsman old American house exterior in red and white during autumn. Northwest, USA

If you purchase a home with a property tax lien, you should expect that you'll have to catch up on more maintenance work than normal. (Getty Images)

The home of your dreams comes with a caveat – in the form of a property tax lien – and you’re not sure what to do. Friends and real estate agents have told you to consider the lien a red flag and move on.

But more often than not, a tax lien on a property doesn’t need to get in the way of your perfect home purchase. It’s simply a matter of doing your homework on the reason for the lien, the amount it’s for and whether your agreed-upon sale price will take care of seller’s debt.

Property taxes are collected by state and local governments to fund public services and institutions and are most often associated with public education, first responder services and operational costs of local museums and parks. In 2016, state, county and local governments throughout the U.S. collected nearly $18.3 billion in property taxes, according to the U.S. Census Bureau.

[Read: The Guide for First-Time Homebuyers.]

A lien is placed on a property when the homeowner fails to pay annual property taxes to the state or local government. The lien is the amount owed and must be paid in order for the sale or refinancing of the property to go through. Other forms of tax debt can also lead to a tax lien on the property.

The mention of a lien can send many homebuyers or investors running for the hills for fear of having to pay off huge amounts of money that have long gone ignored by the seller.

Fortunately, that’s often not the case, says Bob Grubb, CEO of Alliant National Title Insurance Company. In many cases, as long as the homeowner has enough equity in the property, the lien can be paid off with the proceeds of the sale at the time of closing.

“The tax lien would be cured at the closing of the transaction,” Grubb says. “The proceeds that the sellers would get would be swept off to clear that tax lien.”

But if the lien, combined with the mortgage on the house, adds up to more than the sale price, the deal can get tricky. If you owe $300,000 on your mortgage (or mortgages) and have a tax lien for $10,000, a buyer's offer of $295,000 doesn't cover your total debt.

Often, a property tax lien will take precedent as the first lien over the mortgage. This can mean the lender that holds the mortgage will refuse to agree to the sale unless the IRS agrees to make the tax lien secondary to the existing mortgage – meaning the mortgage will be paid off first – and making it more likely the mortgage lien will be paid in full. In any situation when the property’s sale price is less than the total amount of liens on the property, it is a short sale and requires the additional steps for approval by all lien holders involved.

Your title insurance company, whose first job is to research the property’s title and discover all possible defects, as Grubb notes, will first see if the lien can be cleared easily at closing. If not, the title insurance notifies the buyer and seller, who will then have to negotiate to clear the liens and ensure all lien holders are satisfied with the deal.

At this point, you may be looking at a lengthy process to get approval for a short sale from all lenders involved. Expect the deal to take five to six months to get full approval from all parties involved.

Especially if it took the discovery from your title insurance company for you to learn that the home was underwater, there’s a good chance the seller will make the short sale process more complicated. John Myers, owner and qualifying broker for Myers & Myers Real Estate in Albuquerque, New Mexico, who specializes in short sales, says a seller’s unwillingness to provide financial information to the lenders involved is often what causes roadblocks.

“When I’m working with a seller, I’m going to need to make sure they’re willing to provide that information,” Myers says.

If you’re not interested in going through the process or you don’t have the time needed to complete a short sale, your best option is probably to walk away.

[Read: How to Appeal Your Property Taxes.]

During hard economic times like the Great Recession, the IRS will work to modify the procedure to help speed up the process of making property tax liens secondary to mortgages or establish payment plans to help get homeowners out from under the financial burden of a home with several liens. Many of these changes last for the duration of economic downturns and expire when they’re no longer in high demand.

Even with a strong economy and housing market, you may find the property you want to buy has a tax lien on it. Here are five key details to understand before you take your next step in the homebuying process.

Title insurance is key. It's often listed as one of your closing costs, and you should purchase title insurance for the property you’re buying. “What title insurance does is it protects people’s property rights,” Grubb explains. That means making sure the claim to the title of the property is free and clear of any liens. Contact a title insurance company as soon as you go under contract because you want to be sure the discovery process takes place before closing – and a representative for the title insurance company is often at the closing table itself.

Your title insurance will take care of a missed lien. Sometimes liens of any origin – property taxes, unpaid child support or unpaid homeowners association dues – are missed in the original discovery period. If you purchased title insurance, any liens on the property that were missed prior to closing become the responsibility of your title insurance company. You don’t have to worry about paying it off or hiring an attorney. “We’ll go and we’ll pay those property taxes right away,” Grubb says. “Our job is to protect the person who bought that property.”



Without title insurance, any undiscovered lien is your responsibility. If you did not purchase title insurance, unpaid property taxes or a roofer who has yet to be paid for work on the house with a lien that wasn't found before closing becomes your responsibility. As unfair as it may seem, liens are tied to the property rather than the individual owner and therefore become your issue once you take ownership. It’s in your best interest to pay off the liens as soon as possible to avoid interest building up or even foreclosure of the property entirely. If you’re financing your purchase, your lender will likely purchase title insurance as well, but that insurance does not absolve you of responsibility for old debts – it protects the lender, not you.

Tax liens may imply deferred maintenance. Not every unpaid property tax is a result of the seller’s financial distress, but if combined with multiple liens on the property, expect the home to have a few issues. If the homeowner wasn’t able to keep up on bills for a year or two, it’s likely the property hasn’t been getting regular maintenance for the same time period. If tax liens, combined with other debts, lead to a short sale, “just understand you’re buying the home as-is,” Myers says.

[Read: 6 Tax Breaks for Homeowners.]

It’s on you to keep up with your property taxes. While you’re hopefully free and clear of any liens once closing is complete, it’s your responsibility to be sure you pay your property taxes in full and on time. Many county or state governments will post the outstanding amount for each parcel of property that is delinquent on taxes every year. Avoid getting in over your head with property taxes by keeping up with the assessed value of the property, and know your parcel number so you can look it up if you appear on the list of delinquent properties.


19 Essential Tools a DIYer Should Have

Stock up for your next DIY project.

Grungy tools

(Getty Images)

If you're always finding new home improvement projects to take on, you're not alone. In a 2015 study of 500 do-it-yourselfers by Venveo, a digital marketing agency and parent company of DIYConsumer.com, 58 percent of respondents said they do a DIY project either because it's a simple project or they find the work fun, while another 39 percent said they want to save money. Regardless of your reason for taking on a DIY project, you need to be prepared with the right tools. Read on for tools every DIYer should have to tackle home improvement, maintenance and crafting tasks. We've included a price range for each tool, based on current prices at various home improvement retailers like Home Depot and Lowe's, to help you plan your purchases.

The basics

The basics

Old woodworking tools on wall, retro tinted

(Getty Images)

These DIY and maintenance must-haves help set you up for success. They're simple tools that are fairly inexpensive yet key to ensuring your safety, avoiding damage or making mistakes while you work.

The internet

The internet

Happy Asian man lying on the sofa and working on laptop

(Getty Images)

Especially if you're new to DIY projects, take advantage of the free resources available online to help you figure out the best way to build something, make a repair or master regular maintenance you've never done before. "The information is the power," says Chris Zeisler, master technician and technical service supervisor for RepairClinic.com, an online marketplace for appliance and repair parts and equipment. Zeisler recommends watching tutorials and informational videos on YouTube or advice sites like RepairClinic.com to get a better understanding of what you need to do. If you're still nervous about the job after watching tutorials, consult a professional.

Cost: Nothing beyond the cost of your Wi-Fi or mobile data plan.

Safety glasses

Safety glasses

Mixed Race woman cutting wood with saw

(Getty Images)

Regardless of skill level, eye protection is a necessary part of any project you take on. Safety glasses are particularly important when doing tasks that can create debris, like sawing, drilling, spraying paint or using a sealant.

Cost: As cheap as $1.50, or you can go all out and get prescription safety glasses, which can put you back a few hundred dollars.

Tape measure

Tape measure

Close up of unrecognizable manual worker making measurements while working on a piece of wood in carpentry workshop.

(Getty Images)

The saying goes, "Measure twice, cut once." So naturally, you need to be able to measure when it comes to cutting wood for a bookshelf, framing your artwork or simply figuring out what size couch you need for the living room.

Cost: Less than $10.

Level

Level

Woman Using Level

(Getty Images)

Keep your home from looking like a college dorm room and use a level to hang any wall decor. A level is also an important tool when building or repairing anything that's supposed to have a flat surface – a DIY nightstand isn't quite as nice if your glass of water keeps sliding off a slanted tabletop.

Cost: Free phone apps are available, or you check out torpedo, beam or laser levels ranging from $4 to $30.

Drop cloth

Drop cloth

Young couple painting a wall

(Getty Images)

Whether you're painting, sawing, drilling or gluing, keep your floor or driveway from getting damaged by placing a drop cloth beneath your workspace.

Cost: Use an old bedsheet for free, or invest in a canvas or plastic drop cloth for $7 to $10.

Wood glue and other adhesives

Wood glue and other adhesives

Carpenter. Glue on a piece of wood. Closeup.

(Getty Images)

Plenty of DIY projects and repair scenarios can be strengthened with a little extra sealant. For wood projects, use wood glue to back up screws and nails. When wood isn't the material you're working with, a super glue or all-surface construction adhesive can help get the job done.

Cost: Depending on the type of adhesive, expect to pay $3 to $12.

Stud finder

Stud finder

Young man with stud finder examining wall at home

(Getty Images)

If you're hanging a picture frame or shelf, a stud finder allows you to find the best possible place to anchor a nail or screw – without worrying whether it will fall off the wall later. When you're cutting a hole in the drywall, the same stud finder will help ensure you don't cut through an important part of the structure of your house. Studs in residential buildings are typically wood, but a stud finder using magnetism often still works by locating the nails in the stud. More sophisticated stud finders will detect the differences in density along the wall.

Cost: Depending on type, it will cost between $10 and $50.

Ladder

Ladder

A room ready to be painted.

(Getty Images)

A 12-foot ladder isn't necessary if you're an apartment dweller who relies on the property manager for most maintenance issues, but a short stepladder can always help you reach the top shelf in the kitchen or get a better angle while hanging wall decor. In a house, a taller ladder can come in handy for cleaning out your home's gutters, as well as reaching high-up spots while painting, cleaning or decorating inside.

Cost: Depending on height and stability, a ladder will cost anywhere from $40 to $1,000.

Hand tools

Hand tools

Hands sawing wood

(Getty Images)

You don't need construction experience to use these household tools skillfully. These simple tools are an important part of being able to make small, straightforward repairs at home, whether you live in an apartment, condo or house.

Clamp

Clamp

Man crafting wooden chair object keeping wooden boards in hands. Do it yourself project making process. Using press vise

(Getty Images)

In DIY scenarios where the wood glue comes in handy, you'll typically want a clamp to help serve as additional security while the adhesive dries. Clamps also help hold wood and other materials together or in place while you're sawing, drilling or sanding and need help keeping the materials steady. You can opt for a simple C-clamp or bar clamp, which will suffice in relatively simple projects.

Cost: Expect to pay between $3 and $20, based on the size and type of clamp.

Screwdriver

Screwdriver

(Getty Images)

Securing a dresser to the wall or finally putting that Ikea coffee table together will likely see you reaching for a screwdriver. Screws vary in shape and size, so Zeisler recommends checking out a set of screwdrivers with interchangeable screwheads to keep the number of screwdrivers you own down, while still having access to the Phillips head, flat head, Allen wrench (hexagon), Torx drive (star) or Robertson (square).

Cost: Either invest in a set of screwdrivers with different heads or get a multibit screwdriver, which both run from about $7 to $30.

Wrenches and ratchets

Wrenches and ratchets

Cropped shot of man’s hand reaching for a tool from his toolbox

(Getty Images)

Whether you're tightening a bolt on your bed frame or building a deck in your backyard, a wrench or ratchet and socket set is a must-have. Like with a screwdriver, Zeisler recommends checking out investing in a set to help reduce the total number of wrenches you need, and ensure you have the tool for every possible scenario. "You can get more than one thing and more than one component," he says. "Instead of having seven or eight combination wrenches, you can get one particular tool that has a combination of all those on one assembly."

Cost: Sets of wrenches with additional adjustability typically cost around $20. Ratchet and socket sets typically start at about $15.

Claw hammer

Claw hammer

close up builder's hands hammering nail into wood

(Getty Images)

A hammer almost seems too simple a tool to have, but you'll find yourself needing one quite often, whether it's to hang a calendar on the wall, construct a birdhouse or repair siding on your house. A claw hammer is often the recommended go-to for DIY projects because the backside of the tool also allows you to pull out nails as needed.

Cost: Depending on the brand, expect to pay $5 to $40.

Pliers

Pliers

Goldsmith performs a wedding ring.

(Getty Images)

You may need help pulling something apart or holding it in place while you apply an adhesive – and pliers are an effective tool in both cases. Some pliers are specially designed to help cut or strip wire as well, which helps if your project requires some basic electrical work. In such cases, always have the power turned off and call a licensed electrician if you're not sure what you're doing.

Cost: Pliers range from $9 to $40.

Utility knife

Utility knife

person carefully scoring drywall during a remodeling job

(Getty Images)

You could be opening a package you got in the mail or cutting dowel rods that don't quite require a saw, but having a utility knife specifically for home improvement purposes means you don't have to ruin your kitchen knives to complete simple projects.

Cost: Utility knives range from $5 to $45.

Handsaw

Handsaw

Woman with saw cutting wood

(Getty Images)

For a bigger cutting project, have a handsaw ready. This is one tool you want to have your safety glasses on hand for, along with gloves to protect your hands. Before getting started, mark the wood or material you're cutting with a pencil and straightedge to ensure you cut along a straight line.

Cost: Handsaws run between $9 and $25, so there’s no need to break the bank.

Power tools

Power tools

Close-up of carpenter cutting a wooden plank

(Getty Images)

For some projects, you need a bit of additional power behind it. Enter the motorized tool. "If you're going to be in an apartment or condo where it's going to be smaller projects, I don't think power tools are going to come into play," Zeisler says. "But if you’re a homeowner, you've invested in a mortgage [and] you're in the home, you're probably going to want to start getting familiar with some of that."

Drill

Drill

Close-up of carpenter assembling furniture. He is screwing a screw with an electric drill. Selective focus.

(Getty Images)

As you get into more skilled DIY projects, you'll likely need to use a drill to put holes in wood, masonry, plastic or other materials. Different drill bits are used for different scenarios, and most good DIY tutorials will tell you which one to use for setting screws or creating a clean hole. Like with a saw, always use eye protection.

Cost: Cordless power drills run between $50 and $130.

Sander

Sander

Closeup low angle shot of early 30;s man doing some carpentry work in a workshop. He's removing edges on a plank with a lunge router. Wearing protective glass and ear protectors. Tilt shot.

(Getty Images)

When building a bookshelf or giving your current one a makeover, sanding is a key step before the staining or painting phase. A sander takes a painting or staining project from time-consuming to convenient. Many DIY bloggers recommend a 5-inch orbital sander, as it's relatively easy to handle.

Cost: A sander will likely cost between $40 and $70.

Nail gun

Nail gun

A construction worker, an African American man in his 40s, working on a home remodeling project.  He is standing on a ladder with a nail gun, nailing wood posts.  He is serious, wearing safety glasses.

(Getty Images)

When your DIY skills are more advanced, a nail gun might be the tool to help you up your game. Like with a sander, a nail gun makes the time-consuming process of hammering nails happen in a fraction of the time, though it requires a certain level of caution and some more money. There are also different types of nail guns for the project at hand – flooring, roofing and building furniture all use different types of nails, for example. Some of the more sophisticated nail guns require an air compressor, which may come with the tool or need to be purchased separately.

Cost: Expect to pay $80 to $650 or more, depending on the type of nail gun you select.

Circular saw

Circular saw

Close-up of carpenter cutting a wooden plank

(Getty Images)

If you're looking to build furniture or upcycle some key pieces, many DIY tutorials call for a circular saw to cut larger amounts of wood. The circular saw is recommended as the more basic option and is less expensive than a table saw – not to mention, it'll take up less room in your garage.

Cost: As low as $39 or as high as $500.

Read More

Tags: real estate, taxes, mortgages, loans, debt, existing home sales, pending home sales, housing market, home prices, profits


Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at dthorsby@usnews.com.

Recommended Articles

How to Build a Wine Cellar at Home

Sally Forster Jones | Dec. 18, 2018

Before you start building wine racks, keep these important details in mind.

Why You Should Sell Your Home in 2019

Devon Thorsby | Dec. 14, 2018

Housing markets may not be as hot as previous years, but selling now could be your best bet.

The Best Apps for House Hunting

Devon Thorsby | Dec. 12, 2018

These apps will have you scrolling and swiping listings to your heart’s content.

Curb Appeal Tricks to Attract Homebuyers

Sally Forster Jones | Dec. 11, 2018

These simple home improvement projects will have people excited to tour your home.

Housing Market Expectations in 2019

Devon Thorsby | Dec. 7, 2018

Changes in mortgage rates may cause homebuyers and sellers to hesitate about jumping into the market, while renters benefit from higher homeownership rates.

5 Smart Home Tech Options for Your Home

Sally Forster Jones | Dec. 7, 2018

Whether you're looking for yourself or your loved ones, this gift guide for household tech tools will elevate any home in the new year.

Why Renovating Is Better Than Selling

Devon Thorsby | Dec. 5, 2018

Using your savings to improve your current home may pay off more than buying a new house.

How to Make Moving In Together a Success

Devon Thorsby | Nov. 30, 2018

How to navigate splitting chores, paring down belongings and your significant other's bad taste in decor.

Reasons Not to Buy Your House With Cash

Devon Thorsby | Nov. 30, 2018

Before you go all-in with your money, consider these caveats to paying for a home with cash.

Will Interest Rates Changes Home Sales?

Ryan Fitzgerald | Nov. 29, 2018

The decision to sell your house or buy a new one shouldn't be dictated solely by changes in interest rates.

Home Inspection Checklist

Maryalene LaPonsie | Nov. 28, 2018

Learn what to expect from an inspection and tips to make sure your inspector doesn't overlook defects.

Your Guide to HOAs

Devon Thorsby | Nov. 28, 2018

Before you buy a house that's part of a homeowners association, know the basics and what to look out for.

At-Home 2019 Resolutions to Start Now

Devon Thorsby | Nov. 21, 2018

Don't wait until the ball drops to start on these projects.

Rent-to-Own 101

Geoff Williams | Nov. 20, 2018

Before using a rent-to-own arrangement to finance your home, carefully review the terms of the contract.

The Best Time for Home Improvement

Devon Thorsby | Nov. 16, 2018

Plan your year around the ideal seasons for scheduling, outdoor work and the best finished product.

How to Combat Neighborhood Displacement

Devon Thorsby | Nov. 14, 2018

Fight being forced from your community by becoming a more active member in it.

How to Become a Real Estate Agent

Devon Thorsby | Nov. 9, 2018

Follow these steps to start on the path to being a successful real estate agent.

Avoid These Winter Home-Selling Mistakes

Devon Thorsby | Nov. 7, 2018

Keep these tips in mind to avoid making your home sale more difficult.

Winter Home Prep Tasks You've Missed

Devon Thorsby | Nov. 2, 2018

Take these extra steps you may have missed to gear up for the coldest months of the year.

Do Home Value Estimate Tools Work?

Teresa Mears, Devon Thorsby | Nov. 1, 2018

Homeowners now have more control over how home value estimates are calculated.