How to buy a house with back taxes owed: before the tax sale or at it

Can you buy a house that owes back taxes?

Yes. Back taxes are a lien on the property, not a reason it cannot be sold. When a house with unpaid taxes sells, the title company or closing attorney orders a payoff from the county tax collector, and the taxes, penalties and interest come out of the seller's proceeds at closing, just like a mortgage payoff. You get the house free of that lien.

The real question is when you buy. Before the county acts, you deal with the owner. After the county acts, you deal with the county's sale process, and the rules depend on whether your state sells tax liens or tax deeds.

Route 1: buy from the owner before the tax sale

This is the route most guides skip, and it is usually the best one. A tax-delinquent owner faces a public sale of their house, or of a lien on it. If they have equity, selling to you first lets them keep most of it. You get to inspect, run a title search and close with a title company.

It is also fairer to the owner than it sounds. Since the Supreme Court's May 2023 decision in Tyler v. Hennepin County, a government that sells a home for unpaid taxes generally cannot keep the surplus above the tax debt. But a forced sale can still bring far less than a negotiated one, so an owner with equity usually does better selling before the sale.

Deep tax delinquency is one of the hard-distress situations in LowBaller's model. The model targets start bids around 40 to 50 percent under estimated value, with likely closes around 35 to 45 percent under, capped so the number still clears the owner's mortgage, back taxes and closing costs. Those are model targets, not measured closed-deal results.

Finding these owners is free. Treasurers publish delinquent lists, often with the amount owed and any sale date. Our delinquent tax list guide shows where counties post them, and the tax-delinquent property pages show them by metro.

How fast back taxes grow

Back taxes grow. Most counties add penalties and interest for every month or year a bill stays unpaid, and the rates vary widely by state. Here is how a modest annual bill builds, using an assumed 12 percent simple interest rate.

Payoff math: what the seller walks away with

Now put that into an offer. Example: a house worth $200,000, with $70,000 left on the mortgage, three years of unpaid taxes (the $14,880 above plus $400 in county fees), and about $8,000 in closing costs. The owner's floor is $93,280. At a $125,000 price, inside the model's likely-close range, the closing statement looks like this. The lowball offer calculator runs the same math on your numbers.

Route 2: buy at the tax sale (lien vs deed)

If the owner does not pay or sell, the county moves to collect. How depends on the state. In tax lien states, the county sells a certificate for the unpaid taxes. You pay the taxes, earn the interest or penalty set by state law when the owner redeems, and get the house only if the owner never pays and you complete a foreclosure or deed application. In tax deed states, the county sells the property itself. Some states use a hybrid, a redeemable deed, where you get the deed but the owner can still buy it back for a period.

See which system your state uses on our tax lien vs tax deed states page, and find upcoming sales on the tax sale pages, such as Cuyahoga County, Ohio.

Title checks before you buy a tax-delinquent house

Whichever route you take, check these before money moves. A title company or real estate attorney can run most of them.

• A written tax payoff from the county, covering every delinquent year, penalties, interest and fees, good through your closing date.
• Other liens: mortgages, judgments, HOA liens, municipal liens for water, demolition or code fines, and any federal tax lien.
• Sale status: whether the property is already on a tax sale list, the sale date, and any cutoff the county sets for paying off before the sale.
• Certificates already sold: in lien states, a third party may already hold a certificate that must be redeemed at closing.
• Redemption rights: if you buy at a tax deed sale, how long the former owner can redeem and what you can do with the house in the meantime.
• Title insurance: whether a title insurer will cover the deed now, or only after a quiet title action or a waiting period.

How to buy a house with back taxes, step by step

These steps cover the owner route first, because it is the one most buyers should try first. The last step covers the tax sale.

1. 1

   Get the delinquent list

   Download your county treasurer's delinquent tax list or search by parcel. Note the amount owed and any sale date.

2. 2

   Check equity

   Estimate value and look up recorded mortgages. Owners with real equity can sell to you and still walk away with cash.

3. 3

   Find and contact the owner

   Get the owner's mailing address from the assessor and send a short letter. Call only Do-Not-Call-filtered numbers by hand between 8am and 9pm local time.

4. 4

   Order a tax payoff and title search

   Before you sign, have a title company order the county payoff and search for every other lien.

5. 5

   Make an offer that clears the floor

   Your price must cover the mortgage, back taxes, interest and closing costs, or the owner cannot accept it.

6. 6

   Close with a title company

   The back taxes are paid from the seller's proceeds at closing, and you take the house free of the tax lien.

7. 7

   If you go to the tax sale instead

   Learn whether your state sells liens or deeds, register with the county, research title, and bid only up to a preset max.