Tax Lien Is A Document
Tax Lien, two words guaranteed to send chills down almost anyone's spine. Yet, what is it really? In its simplest terms: it's a document, issued by a court, saying that someone owing taxes to some municipality (city, county, state etc.) has not paid them. As a result, one of two things will happen: they either pay the taxes, or title to the property (after a specific period of time) passes to the lien holder.
If the item is a piece of personal property (e.g. a motorcycle, a stereo, a car), it'll be seized and then sold at a public auction. In the case of real estate, it can either be taken and sold or, in some states, the lien is sold to investors. They, in turn, can foreclose on the property and force its sale in order to recoup their investment.
So, naturally, most people would want to go with the "pay the taxes" option. Even this has several possible methods of being carried out. First, of course, is just making a direct payment. Next, there's the indirect way. Very often people have a mortgage holder, and through that, an escrow account for paying taxes and insurance.
Even if they don't have an escrow account in place, when the tax bill is sent to them, it is also sent to their mortgage holder. They in turn may pay the taxes and then demand payment from the owner and/or create an escrow account to obtain the expended monies. Some people might wonder why their lender would pay their taxes, why be so generous? No real secret. If the property were sold to satisfy unpaid taxes, the mortgage company might end up losing some money. After all, it's entirely possible the property will be sold for less than what's owed on the mortgage. Doesn't take a rocket scientist to figure that that's a no-no. The final method for satisfying a lien may seem a bit extreme: selling the property in question. So long as the owner sells the real estate before a tax foreclosure by a government agency, the lien will usually be paid as part of the closing costs. Unlike a personal debt, a tax lien applied to a piece of property stays with the property. The phrase often used is: "runs with the land." A prospective buyer will not want to take possession of a house or lot, or any kind of real estate that has a lien against it. Therefore, the lien will have to be satisfied - paid in full - prior to the transfer of title. The only certainties in life are death and taxes, as the old saying goes. So, the possibility of a tax lien is always there. Yet, it, like almost anything in life, can be dealt with. It's just a matter of knowing how.
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