If you are unfamiliar with tax liens, let me explain the basics. Tax liens are used to obtain delinquent tax amounts owed on real or personal property. A tax lien can be used to obtain delinquent personal taxes, such as overdue income taxes, or for taxes owed on the asset.

Real estate tax liens are the most usual form of tax lien. A significant difference between real estate and personal property tax liens is that a tax lien placed against a piece of real estate will remain with the property. This means that if you purchase a house which has been attached, you will be held responsible for the tax lien if it is not detected prior to closing.

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.

When a property is sold which has outstanding taxes due, any lien against the property will normally be paid from the proceeds of the sale as a portion of the closing costs. If a tax lien is not detected prior to the sale, the delinquent tax will pass to the new owner.

Sometimes mortgage holders will pay the late taxes when they receive the notice of taxes due and then will invoice the home owner for the amount paid. Mortgage holders will do this to protect their interests because a governmental tax lien outweighs the mortgage payment due to the mortgage holder.

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.

Home owners typically have a period of time within which to come up with the money to pay the overdue taxes. In the event the taxes are not paid as required, the real or personal property can be seized, auctioned off, and the sale proceeds used to bring the taxes current.

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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