Shopping for a new home can be both exciting and stressful. Finding the perfect house, though, is only part of the equation. You also must do some research to see if the property has any liens. While there are a variety of liens that may attach to a piece of real estate, tax liens are common.
Before you purchase a house with a tax lien, you should understand the implications of doing so. Here are three risks you should consider.
- You may have trouble obtaining financing
If you have enough cash to cover the cost of your new home, you probably do not have to worry about securing financing. Still, like many Americans, you may need to ask a financial institution for a loan. If that is the case, you may have difficulty obtaining financing for a property that has a tax lien attached to it. Further, because tax liens often scare title insurers, obtaining title insurance for your new home may be equally tough.
- You become responsible for paying taxes
You should understand that tax liens attach to the property instead of the homeowner. As such, if you buy a piece of real property that has a tax lien, payment of the taxes and any associated penalties becomes your responsibility. Further, if you do not pay the outstanding bill in full before putting your house on the market, you may have trouble finding a buyer who is willing to purchase it.
- Your house may need some work
Property taxes can be expensive. If the seller of your new home does not have enough money to pay the tax collector, he or she may also have insufficient funds to keep the property in good condition. While it is usually a good idea to ask a home inspector to look at a house before closing, doing so on a house with a tax lien is arguably more important.
As you can see, buying a house with a tax lien can be risky. While there may be some ways to reduce your exposure, you should always think twice when considering making an offer on a home that has a tax lien.