Can I Sell My House in Oregon With a Tax Lien?

Life doesn’t always go as planned. Unexpected challenges such as the pandemic, rising inflation, or other financial setbacks might have caused you to miss property tax payments. When this happens, your city or county can place a property tax lien—a legal claim—against your home.

Similarly, if you’ve fallen behind on your federal income taxes for several years, the IRS can also file its own lien.

If you’re considering selling your home but there’s a lien attached to it, here’s what you need to know about selling a house with a tax lien and the strategies available to homeowners.

Can You Sell a House With a Tax Lien?

Yes—you can still sell your home with a lien on it. In fact, selling may be one of the most practical ways to pay off what you owe. If the sale price is high enough, the proceeds can cover both your mortgage balance and the tax debt tied to the lien.

However, each state and the IRS has specific rules about how liens must be handled. You can’t simply bypass the lien; it must be settled before ownership can officially transfer.

Homeowners with significant equity often sell their homes to pay off liens and other debts. While this may not be your preferred choice, it can be an effective way to regain financial stability.

What Exactly Is a Tax Lien?

A tax lien on real estate is a legal claim made by the government—local, state, or federal—because of unpaid property or income taxes. It doesn’t mean the government owns your home, but it ensures they’ll get paid when the property is sold or refinanced.

• Property tax lien: Filed by your city or county if you fail to pay property taxes.

• State tax lien: Filed if you owe unpaid state income taxes.

• Federal tax lien: Filed by the IRS if you’re behind on federal income taxes.

If ignored, a lien can eventually lead to foreclosure or even an IRS seizure of your property.

How Do Tax Liens Affect a Home Sale?

A lien doesn’t stop you from listing your house for sale, but it complicates the closing process.

• If your sale price covers both your mortgage and lien, the lien will be cleared at closing.

• If you don’t have enough equity, you’ll need to resolve the tax debt before selling—or request that the lien be released or subordinated.

Ways to Pay Off a Property Tax Lien

There are several methods to deal with a lien before or during the sale of your home:

1. Use home equity from the sale
   If your home is worth more than your debts, you can use the sale proceeds to cover both the mortgage and lien.

2. Set up a payment plan
   The IRS or state revenue department may allow monthly payments to resolve your debt gradually.

3. Offer in Compromise (OIC)
   In some cases, the IRS may accept less than the full amount owed if you prove financial hardship.

4. Chapter 13 bankruptcy
   This option allows you to restructure and repay debts under a court-approved plan while protecting your home from immediate seizure.

5. Personal loan
   Some homeowners use personal loans to clear liens before selling, though approval can be tough if you already have financial struggles.

Selling With an Income Tax Lien

Federal tax liens often take priority over other debts. In these cases, you may need to:

• Request IRS subordination (Form 14134) so your mortgage lender can still be paid first.

• Seek a Certificate of Discharge to remove the lien completely, if you meet IRS requirements.

• Consult a tax attorney if your state has placed a lien. Laws vary widely.

• Dispute the lien if you believe it’s incorrect by requesting a hearing with the IRS Appeals Office.

Will a Tax Lien Impact Your Next Home Purchase?

Although tax liens no longer appear on credit reports, the financial strain that caused them may still affect your credit score and mortgage eligibility. The good news is that there are lenders who work with borrowers who’ve had past tax issues, bankruptcies, or credit struggles.

Conclusion

Selling your house with a tax lien is possible, but it requires careful planning. The lien must be addressed either with sale proceeds, direct payment, or negotiation with the IRS or your state. While the process can feel overwhelming, it could also be the financial reset you need.

If you’re considering this path, explore your options, consult with a tax professional, and learn how to prepare your home for sale so you can move forward with confidence.