Who am I paying when I buy a house that owes taxes?

6 Replies

If a homeowner  offers me to buy his house before  he gets a tax lien or before it gets auctioned due to back taxes owed on the property, who would I be paying?  I figure I shouldn't give the money to the homeowner since he could just keep it, so again who do I pay and how do I protect myself?

Originally posted by @Nancy Lamar :

If a homeowner  offers me to buy his house before  he gets a tax lien or before it gets auctioned due to back taxes owed on the property, who would I be paying?  I figure I shouldn't give the money to the homeowner since he could just keep it, so again who do I pay and how do I protect myself?

 Pay it through escrow. Have them make it a "closing cost" for you. They might require that anyways, as a condition of title insurance. Let's not overthink this one. :)

I just buy stuff like this with a Quit Claim Deed and cash. I just withhold the taxes to make sure they get paid.

@Nancy Lamar a title company or Escrow company should handle the "Settlement" of the property. They will do a title search and make sure all bills get paid and offer you title insurance. At settlement (some areas call it closing) you pay the title or escrow company. The then take that money and divide it up to pay bills against the property and what is left goes to the seller. While not required, it is always a good idea to get title insurance. 

In most cases you should not be paying cash to the owner.  You'll want to close at a title company who will handle issues like this for you.  They'll ensure the right taxes and penalties are paid to the right entities.  They ensure there are no other liens to worry about like bankruptcy or IRS.  They'll insure you that the seller has the right to sell the property and check their ID.  Part of this is called title insurance.

   Thanks for all of your answers, I'm sure this is basic info but? I'm new to investing so I need all of the help I can get. I do have another question, how can I find out the exact amount owed on back taxes? Is this something the title company will also tell me or can I find out another way?

   Thanks for all of your answers, I'm sure this is basic info but I'm new to investing so I need all of the help I can get. I do have another question, how can I find out the exact amount owed on back taxes? Is this something the title company will also tell me or can I find out another way?

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