If a person owns their house outright but the property taxes are way past due and they can’t pay them, can they still sell the house? Is there a point (before the government seizes the house) where they can’t sell the house anymore? This is in Oregon.
I would suspect there would be a lien on the house and the back taxes would be deducted from the sales price at the closing. In any case, I can’t imagine that the unpaid back taxes wouldn’t be a “material defect” which a seller would be required to disclose.
A Title search at closing will uncover any back property taxes or liens on the property.
Cite (different state but this is pretty common everywhere)
https://www.usechicagotitle.com/BuyersSellers
Can’t speak for Oregon and can’t speak for “way past due”.
But last year my brother and I sold a small patch of land we owned together.
For the property taxes we opted to pay quarterly which was allowed by the municipality. I paid the first 2 quarters and he was to pay the second 2. But, to both out surprise we sold the land before it came time for his share to be paid. What happened was we still had to pay the tax and couldn’t shift it to the buyers. So the owed tax came out of my brothers share of the proceeds of the sale. It came out before the bank could cut a check. Have no idea if this helps the OP in the least.
YMMV.
When I bought a house, and the same applies to friends who have… the lawyers calculate the taxes due or overpaid and the amount of money changing hands is altered so the appropriate taxes are taken care of.
IANAL, but, for example:
Taxes are paid every July 1st for the calendar year. I sell the house on October 1st. That means the buyer is not only acquiring a house, he’s also acquiring Oct through Dec taxes pre-paid. The buyer will shell out the agreed purchase price plus 3 months’ worth of taxes. I sell the same house but on March 1st. I am selling the house, but Jan and Feb taxes are outstanding. I therefore get the sale price minus two months’ taxes.
So short answer - if the taxes are not yet a lien then the lawyers arranging the sale, or the real estate agent, will likely warn the buyer about them; more likely, they will take part of the sales amount to pay the taxes in order to ensure there is no debt associated with the property.
FWIW, I’m a real estate broker in Indiana, though I have not practiced much.
Property taxes are paid differently in different states. In Indiana, they are paid in arrears.
At the closing, any property taxes due will be known by the title company, and there is a traditional and/or legally required (depending on the locale) way of deciding who pays them. Typically, it’s divided up to equitably reflect who actually incurred them or will incur them. Thus, if the seller owes a lot of back taxes, they will subtracted from the proceeds s/he receives.
It would take a major cockup on the part of the title company to do a closing without correctly understanding the amount of back taxes.
I bought a house that had property taxes past due on it (in Ohio). The title company said in writing that it would be taking care of the taxes and I should not worry about it.
A year later I got a summons from the county court. “You never paid your back taxes!” I freaked the fuck out. I had all the paperwork that said the title company would pay for it. The title company had paperwork that the previous owners had paid for it. The title company failed to actually pay the taxes and just kept the money from the previous owners. And then trying to get them to fix it was like pulling teeth. They did fix it, right before I was going to get in major trouble.
So yes you can sell a house, in Ohio, with property taxes owed. Just don’t use Barristers of Ohio as your title company because they are fucking useless.
If you have a mortgage on the house, you will probably be assessed for the taxes in your mortgage payment, and the company will pay the taxes directly. Too many mortgage companies ending up losing money to unpaid taxes.
The government is very powerful, and after the real estate commission, unpaid property taxes are next in line to be paid directly from the sale. Mortgages are third (short sales occur when there isn’t enough money to cover the unpaid mortgage amount, and the company agrees to accept that amount instead of trying to get the balance from the owner), and then any other liens.
The owner gets what’s left (if anyone)
The house across the street from me was sold at a tax auction. The buyers had to pay the taxes owed in addition to the amount they bid on the house.
The taxes usually have to be squared away before any house can be sold.
While I’m sure it was a major pain, I don’t think you should have been in any real trouble. It’s the title company’s job to make sure taxes are paid. They are supposed to find any mortgages, liens, unpaid taxes or judgments against the property. Taxes and mortgage interest are figured as of the day the sale closes. The title company’s ‘raison d’etre’ is to make sure that after you buy a property, you don’t find any surprises afterwards.
Might be true where you are, but certainly not everywhere. I’ve had 4 different mortgages and on 3 of them I paid property taxes directly to the city. On the 4th the bank collected with the mortgage payment and kept the funds in an escrow account, but they still didn’t pay them directly. They would cut me a check at the end of the year and I was still responsible for the payment to the city.
No, this is why buyers and sellers have real estate lawyers. A lien on the house and property tax status would obviously be part of the title search. When I bought my current house some of the property tax had been paid up in advance, which was nice, but the point is my lawyer had all that info.
In my state, real estate taxes act as a lien against the property from the day they are assessed, even when not yet due.
In a typical sale, the seller guarantees you clean title. So, if there are, say, three years of unpaid property taxes, the seller must pay the back three years of property taxes when he receives your payment. It is no different than if he had a mortgage on the house for that same amount; he must pay off any prior liens before delivering title.
It’s interesting how things are different. In the UK, property tax is a simple debt owed by the householder, who may not be the owner. When title changes hands, any unpaid taxes would be pursued by the local authority with the original debtor in the usual way. If they emigrated, it would have to be written off as a loss.
In North America, taxes are owed by the property, so the owner of record. A property with too long outstanding taxes (IIRC, 3 years owing where I used to live) can be seized and auctioned off; proceeds first going to pay taxes, the remainder to mortgage then owner.