If you need to sell a house with a tax lien in Texas, the first thing to understand is that not all liens are the same. An IRS federal tax lien and a local property tax lien follow completely different rules, and confusing them can cost you time and money when you are ready to sell.
What Is the Difference Between an IRS Lien and a Property Tax Lien?
These two types of liens both attach to your home, but they come from different sources and behave differently during a sale.
Where Each Lien Comes From
A property tax lien is placed by your local government when annual property taxes go unpaid. In Fort Worth and Arlington, TX, Tarrant County can place a lien on your home if those taxes are not paid by the deadline each year. This lien attaches automatically and does not require a court order.
An IRS tax lien is a federal claim. It arises when you owe back taxes to the Internal Revenue Service and fail to pay after receiving a formal demand. The IRS files an IRS Notice of Federal Tax Lien in the public record to alert other creditors that the federal government has a claim against your property and other assets.
Which One Has Priority?
Lien priority determines who gets paid first when your home sells. In Texas, property tax liens hold a super-priority status. That means they are paid before almost any other debt, including mortgages and federal tax liens. Even if your IRS lien was recorded before your county tax lien, the county still gets paid first.
How Each Lien Is Removed at Closing
A property tax lien is typically removed at closing when the title company pays the Tarrant County tax assessor directly from your sale proceeds. The closing professional can obtain current tax information and determine the amounts that must be addressed through settlement.
An IRS federal lien is more complex. The IRS must either be paid in full from the proceeds or agree to release its claim through a formal process. Simply closing on the sale does not automatically remove a federal lien unless the proceeds are sufficient to cover it.
How Does a Federal Tax Lien Affect Selling Your House in Texas?
A federal tax lien does not prevent you from selling your home, but it does add steps to the process. Understanding those steps ahead of time keeps the sale from stalling.
What Happens When the Sale Proceeds Cover the Lien
If your home has enough equity to pay off the IRS debt in full, the closing process handles it much like a mortgage payoff. The title company contacts the IRS, confirms the payoff amount, and wires the funds. The IRS then releases the lien, and the title transfers cleanly to the buyer.
The payoff amount includes any penalties and interest that have built up, so the final number may be higher than the original tax debt. Requesting a current payoff statement early gives you an accurate picture before you commit to a sale price.
What Happens When the Sale Proceeds Do Not Cover the Lien
This is where many sellers in Fort Worth, Frisco and Arlington get stuck. If your home’s value is less than the total IRS debt, the agency will not automatically release the lien just because you sold the property.
In this situation, you may be able to apply for an IRS discharge of lien using Form 14135, the Application for Certificate of Discharge. A discharge allows a specific property to be sold free of the federal lien even when the full debt is not paid. The IRS grants this when it determines that its interest in the property has no value, or when it receives a portion of the proceeds equal to its equity interest.
What Buyers and Title Companies Need to See
A recorded federal tax lien generally creates a title requirement that must be addressed before the title insurer and parties are willing to complete the transaction. Buyers also have a right to clear title, meaning the property must be transferred without encumbrances or existing claims attached. Providing the IRS discharge certificate or a payoff confirmation satisfies both the title company and the buyer before the closing date.
Can You Sell a Home With Both an IRS Lien and Back Property Taxes?
A property can be subject to both local property-tax liens and a federal tax lien at the same time. It is stressful, but it does not mean selling is impossible.
Understanding What You Owe
The first step is getting an accurate picture of every lien attached to your property. For property taxes, you can request a statement from the Tarrant County Tax Assessor-Collector. The taxpayer or authorized representative can obtain current lien and payoff information from the IRS through the applicable IRS process.
Once you know the total amount owed on both liens, you can compare that figure to your home’s current market value. That comparison tells you whether a traditional sale will generate enough equity to cover everything, or whether you need to explore other options.
Selling to a Cash Buyer With Liens in Place
When traditional financing is involved, most lenders will not approve a mortgage for a buyer purchasing a home with outstanding federal or property tax liens. That is one reason many sellers in this situation turn to cash buyers.
We work directly with homeowners carrying both types of liens. At Starfish Group Properties, we review the lien details, assess the property, and structure an offer around the real numbers. Because Starfish Group Properties does not rely on buyer mortgage financing for a direct cash purchase, there is no buyer-lender underwriting requirement.
How the Closing Process Works With Multiple Liens
When multiple liens exist, the closing requires a clear payoff order. Property tax liens are paid first due to their super-priority. The IRS lien is addressed next, either through a full payoff from the proceeds or through a pre-approved IRS discharge. Any remaining mortgage balance is paid after that.
Frequently Asked Questions
Can I sell my house in Texas if the IRS has filed a lien against it?
Selling a home with an active IRS lien is possible in Texas, but the lien must be addressed before or at closing to transfer a clear title. If the sale proceeds are enough to pay off the debt, the IRS releases the lien at closing. When proceeds fall short, an IRS discharge of lien through Form 14135 may allow the sale to move forward without full repayment.
What happens to back property taxes when I sell my Fort Worth home?
Back property taxes owed to Tarrant County are treated as a super-priority lien in Texas, meaning they are paid directly from your sale proceeds before any other debt. The title company handles this payment at closing, and the lien is released once the balance is paid in full, including any penalties or interest that have accrued.
How does Starfish Group Properties handle homes with both IRS and property tax liens?
We can include known lien information in our transaction evaluation while the closing professional confirms the final settlement figures. Our process accounts for both the IRS payoff requirements and any outstanding property tax balances owed to the county. For homeowners who need to sell a house with a tax lien in Texas, we work through the legal and financial details so the path to closing is as clear as possible.