When investing in real estate, most people perform a title search to check for any tax liens. However, if someone does not do a check or if someone misses a lien on the property, it can become a problem later for the buyer.
If you have an interest in real estate investment, you need to understand what tax liens mean for your property.
Tax liens can become part of the closing costs
If you discover existing liens before you close on the property, you can discuss how to handle the lien with the property owner. In most cases, the property owner should pay the lien for closing costs. However, if the property owner cannot pay the lien, you may resolve it yourself. Likewise, you can choose to back out of the deal.
Tax liens become your responsibility
Sometimes, you may miss the lien before you close on the property. If there is still a lien on your property after closing, you become responsible for it. However, if you have title insurance, it can protect you from the excessive cost of tax liens.
Keep in mind that if there are tax liens on the property, it could mean that the property owner could not keep up with bills for a couple of years before the sale. This means that there may be maintenance issues with the property that you need to think about. When you purchase a home with debts and tax liens, you may have to buy the property as-is.