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How a tax lien attaches to your California house
Three different agencies can put a lien on the same house, and sellers tend to lump them together. They behave differently, so start by working out which one you actually have.
A county property tax lien is automatic. California property taxes come in two installments: the first is due November 1 and goes delinquent after December 10, the second is due February 1 and goes delinquent after April 10. Miss either and the county adds a 10% penalty. Stay unpaid through June 30 and the parcel is declared tax-defaulted on July 1, after which redemption penalties accrue at 1.5% a month.
A federal tax lien is not automatic. It begins as an IRS assessment and only becomes public when the IRS records a Notice of Federal Tax Lien with your county recorder. Once recorded, it attaches to everything you own in that county, the house included.
A state tax lien comes from the California Franchise Tax Board and works much the same way: recorded with the county recorder, often with the Secretary of State as well.
None of the three stops you from selling. They have to be cleared before clear title can pass, which is a different thing, and a much smaller problem than most sellers assume.
Which lien you have changes your timeline
Priority is the part sellers get wrong. County property tax liens sit ahead of almost everything, including your mortgage. A recorded IRS or FTB lien takes its place in line by recording date, so a mortgage recorded in 2019 outranks an IRS lien recorded in 2023.
That ordering decides who gets paid out of your proceeds and in what order. It also decides how long you wait, and that is where sales slip.
County payoff figures come back in a day or two, because the county already has the number sitting in its system. Federal and state payoffs take longer. The IRS asks for 45 days on a discharge request. It often moves faster, but planning for less is how a closing date gets missed.
Order the payoff demands first, not last. That single sequencing decision is worth more than anything else on this page.
What the payoff actually looks like in escrow
For most sellers this is less dramatic than it sounds. The liens come out of the proceeds and you keep the rest. You are not writing anyone a check.
Here is the arithmetic on a $600K sale with a $300K mortgage, $28K in defaulted property taxes and a $45K recorded IRS lien:
| Line | Amount |
|---|---|
| Sale price | $600,000 |
| Mortgage payoff | ($300,000) |
| Defaulted property taxes and penalties | ($28,000) |
| IRS lien payoff | ($45,000) |
| Closing costs (we pay the standard ones) | $0 |
| Net to you | $227,000 |
You see that math on the settlement statement before you sign anything. The title company orders the payoff demands, the escrow officer wires each lienholder at closing, and the releases get recorded afterward. You do not chase the releases yourself.
When the liens are worth more than the house
This is the case worth being honest about, because it is where a lot of buyers quietly walk away.
If the lien stack exceeds what the house will sell for, the sale does not automatically die. The IRS can issue a certificate of discharge under section 6325(b) of the Internal Revenue Code, which releases that specific property from the lien so the sale can close even when the IRS is not paid in full. You apply on Form 14135. The FTB runs a comparable process.
Both agencies want proof they are receiving everything realistically available, so the paperwork carries the file: an appraisal or broker's price opinion, payoff figures for everything ahead of them in line, and a draft settlement statement showing where every dollar goes.
We have closed both kinds. Expect weeks rather than months, and start the application before you are under contract rather than after.
The honest caveat: if the stack sits far above the value and nothing is coming back to you, selling may not be your best move at all. That is a conversation for a tax professional or a real estate attorney, not for us.
Selling versus riding out the redemption period
California gives you five years from the tax-default date before the county can offer your house at a tax auction. Five years sounds like room, and it is why plenty of owners wait.
Run the arithmetic first. Redemption penalties accrue at 1.5% a month on the defaulted balance, which is 18% a year. On $20K of defaulted taxes that is roughly $300 a month, about $3,600 a year, on top of whatever the house already costs you in mortgage, insurance and upkeep. Ride the full five years out and the penalties alone can approach the size of the original debt.
Waiting is the right call if you have a realistic payoff plan, an installment arrangement with the county, or money arriving on a known date. Waiting because the deadline still looks far away is the expensive version.
Your timeline with My Home Sold
Step 1: Lien identified
IRS, FTB, county property tax, mechanic's lien. Tell us what you know and we will find what you don't.
Step 2: Title pulls payoff
The title company orders official payoff statements. Budget 5–10 business days for federal and state liens, a day or two for the county.
Step 3: Net proceeds calculated
The settlement statement shows each payoff coming out of your proceeds. You see the math before signing.
Step 4: Closing and lien release
Funds wire from escrow direct to each lienholder. The releases get recorded. You are done.
Your options compared
| Factor | Traditional listing | iBuyer | My Home Sold |
|---|---|---|---|
| Time to close | 60–120 days | 14–60 days | 7–14 days, longer if an IRS discharge is needed |
| Will proceed with liens recorded | Often, but the buyer's lender may balk | Usually declines open tax liens | Yes |
| Handles the discharge paperwork | You or your agent | No | We do |
| Penalties accruing while you wait | 2–4 more months at 1.5% a month | 1–2 months | Days |
| Fees and commissions | 6–9% of sale price | 5%+ service fee | $0 |
The tradeoff is real and worth naming: we buy at a discount to retail, typically 10–20% depending on condition and market. On a lien file that discount is usually offset by the commissions you don't pay, the penalties that stop accruing, and the months of carrying costs you skip. Usually, not always. If your house is retail-ready, your equity is strong and no deadline is bearing down on you, a traditional listing will probably net you more, and we will tell you so.
Compare the routes in our guide to selling a house fast in California, or read how a cash sale stacks up against listing and iBuyers.
Sell your California house the easy way
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Common questions
Questions people ask about this
- Can I sell my California house if the IRS has a lien on it?
- Yes. IRS liens are common and don't block a sale, they just get paid out of escrow at closing. The title company orders the payoff from the IRS, the IRS files a release after payment, and you walk away with whatever equity remains. We've closed dozens of these.
- What if the lien is bigger than my house is worth?
- You can request a "discharge of lien" or partial release from the lien holder so the sale can proceed. The IRS has a formal process (Form 14135), and the FTB has its equivalent. The lien holder accepts whatever the sale generates and the rest of your debt remains, but the property transfers free and clear. We can help coordinate.
- Will my credit get hit when the lien is paid off?
- Paying it off is a positive event, but the original lien filing remains on your credit report for up to seven years from the release date. Selling to clear the lien doesn't erase the history; it just stops the bleeding.
- Do I have to disclose the tax lien to the buyer?
- Yes. Recorded liens are part of the title commitment any buyer (including us) sees automatically. There's no hiding it, but there's no reason to, we expect tax liens on the kind of properties we buy and price the offer with the lien factored in.
- How long does the payoff process add to closing?
- Usually 5–10 business days. The title company orders the payoff, gets the response from the IRS or FTB, and includes the number on the settlement statement. We can still close in 14–21 days even with a lien on file.
Written by
Adrian HernandezCEO/Owner, My Home Sold
Adrian Hernandez founded My Home Sold in 2015 and has led it through more than 900 direct home purchases across Southern California. He has appeared on FOX 11 Good Day LA discussing the shift in the Southern California market and what it means for homeowners whose listings are not moving.
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