Selling a House With Liens or Back Taxes in Philadelphia

Can you sell a house in Philadelphia with liens or back taxes?

Yes. A lien is a legal claim against a property for a debt. It stays with the house, so it has to be paid or released before a buyer gets clear title, and that almost always happens at closing, out of the sale money. The City says unresolved water liens pass on to the new owner, so no careful buyer will close without a payoff.

The usual Philadelphia liens are unpaid Real Estate Tax, water bills, L&I bills for City work, court judgments, IRS and state tax liens, the mortgage, and inheritance tax on an inherited house.

What happens when you fall behind on Philadelphia property taxes?

The bill grows every month, becomes a lien, and can lead to a tax sale. Here is the City's schedule.

On a $2,000 tax bill, the additions alone come to $300 by January 1. To see your balance, search your address or OPA number (the City's property account number) on the Philadelphia Tax Center.

When can the City sell a house for back taxes?

Once the tax is delinquent and there is no payment arrangement. The Sheriff's Office says a property may go to a Tax Sheriff Sale when the owner fails to make a payment arrangement on City debt, including water and sewer bills. Under Pennsylvania's Municipal Claim and Tax Lien Law, the City must first petition the court, everyone with an interest is notified, and a judge decides after a hearing. The sale wipes out the other liens and the mortgage.

An owner who lived in the house for the 90 days before the sale, and still does, may be able to get it back within nine months of the sheriff's deed by paying what is owed and repaying the buyer. A vacant house cannot be redeemed. For a rental, the City can also ask the court for a rent sequestrator, who collects the rent to pay the debt. See our sheriff sale guide.

How do you get on a payment plan?

• If you live there: an OOPA. Payments follow your income and household size, can be as low as $0 a month, need no down payment, and the City may waive part of the interest and penalties. You may qualify even if your name is not on the deed, if you have a legal interest in the house. The City says it protects your home from a tax sale while you follow its terms.
• If you do not live there: a payment agreement. Up to 48 months, with an affordable down payment, while you also pay the current year's tax. Call the Department of Revenue at (215) 686-6442.
• To lower future bills: the Homestead Exemption, the senior and low-income tax freezes, and LOOP (the Longtime Owner Occupants Program).

How do unpaid water bills turn into a lien?

The City says delinquent water and wastewater bills can result in a lien on the property, and water debt can lead to a tax sale just like Real Estate Tax. The City's free water lien search shows up to 15 years of recorded water liens. The amounts may not include court costs, so it does not replace a title search.

For a sale, you or the title company email the Water Revenue Bureau's Water Payoff Request Form to [email protected] at least 30 days before settlement. If your meter is estimating or not working, call (215) 685-6300 first, because the City says that can affect your payoff.

Keeping the house? TAP, the Tiered Assistance Program, sets the same water bill every month for qualifying households with low income or a special hardship. Each TAP bill you pay in full forgives 1/24 of your old debt, so after 24 full payments it is gone. Residents 65 and older under an income limit can get 25% off. Apply at cap.phila.gov.

What are L&I liens, and how do you look up what you owe?

When a property falls below basic safety standards, L&I (the Department of Licenses and Inspections) can do the work and bill the owner: removing rubbish, cleaning vacant lots, sealing up a vacant building (often called clean and seal) or demolishing an unsafe one. If the bill goes unpaid for 30 days, a lien may be entered. Open code violations are a separate issue; see our code violations guide.

You can check most City debts yourself:

What other liens can show up on a title search?

The City notes that a title search lists all the liens and judgments that may affect a property. These surprise people most.

• Court judgments. In Pennsylvania, a money judgment from the Court of Common Pleas is a lien on real estate you own in that county, even one from an old credit card lawsuit. A creditor can keep it alive by reviving it within five years. Overdue child support on record with the county's domestic relations office is a lien too.
• IRS liens. A Notice of Federal Tax Lien covers all your property. If the sale pays the tax debt in full, the IRS releases the lien within 30 days. If not, apply for a certificate of discharge (Form 14135, with IRS Publication 783) at least 45 days before closing, so that one property can be sold.
• Pennsylvania tax liens. The state Department of Revenue files liens with the county Prothonotary and expects to be paid before a home sale goes through. Ask for the amount on its form REV-1038.
• Your mortgage or home equity line. For most home loans, the servicer must send a payoff statement within seven business days of a written request. If you have a home equity line of credit (HELOC), have it closed at payoff so the lien is released.
• Inheritance tax. Pennsylvania inheritance tax, plus interest, is a lien on the house until it is paid. Rates run from 0% for a surviving spouse to 4.5% for children, 12% for siblings and 15% for most other heirs. See our guide to selling an inherited house in Philadelphia.

How do liens get paid off at closing in Philadelphia?

1. The title search. The title company finds every mortgage, lien and judgment against the house and its owners.
2. Payoff letters. It gets a written payoff from each creditor, good through the closing date.
3. The settlement statement. Each payoff becomes a line you review before you sign.
4. Closing day. The settlement agent pays each creditor from the sale money, not from your pocket, and the liens are released.
5. Your money. You receive what is left.

In a sale to us, what comes out of the price is only what you already owe against the house. A listing may bring a higher price, but your share of the 4.578% transfer tax, the commission and other costs come out too. See what it costs to sell a house in Philadelphia.

What if you owe more than the house is worth?

Then you bring money to closing, or someone agrees to take less. Start early; each of these takes time.

• The mortgage: a short sale. The lender has to approve a sale for less than you owe. The Consumer Financial Protection Bureau says to ask the lender to waive the rest of the debt (the deficiency) and to get that in writing.
• Judgments and other private liens. Ask each creditor, in writing, what it will accept to release its lien at closing.
• City charges. The City says you have the right to appeal any interest and penalty charges: by a Petition for Waiver of Interest and Penalty when the interest is under $15,000 and the penalty under $35,000, or through the Tax Review Board above that.
• IRS liens. The IRS can issue a discharge even when the debts ahead of it leave its share of the sale with no value.

What are your options when the house has liens?

Many owners are better off keeping the house on a payment plan. A free housing counselor through the Save Your Home Philly Hotline, (215) 334-4663, can help you compare and apply.

If your debts go well beyond the house, talk to a bankruptcy attorney before you decide.

How do back taxes work in the PA suburbs and South Jersey?

Bucks, Delaware County, PA and Montgomery County, PA

Outside Philadelphia, unpaid property taxes go to the county Tax Claim Bureau under Pennsylvania's Real Estate Tax Sale Law. The Bureau mails a notice by July 31 of the year after the taxes were due. If the claim is still unpaid on December 31, the house can be offered at the upset sale (a public auction for back taxes), held no earlier than the second Monday of September. Bucks calls that September of the second year after the original bill. Montgomery County, PA and Delaware County, PA also sell in September.

Before the sale you can pay in full, or the Bureau may let you sign an agreement to pay 25% down and the rest in no more than three payments within a year. Miss a payment and the house can go to a later sale. After the sale, there is no right to buy it back. See Bucks County, Delaware County, PA and Montgomery County, PA.

South Jersey

New Jersey towns sell tax sale certificates, not houses. The winning bidder pays your overdue taxes or town charges and gets a certificate, a lien on your house that can earn up to 18% interest. You can redeem it by paying it off with interest, costs and a penalty of 2%, 4% or 6%, and a sale of the house does that at closing.

A private holder can sue to foreclose your right to redeem after two years, or after six months when the town holds the certificate. You can redeem until the court's final judgment, but a filed case adds a $2,500 attorney's fee. Since July 2024, an owner can ask the court to have the house sold at a sheriff's sale or online auction instead, to protect any equity. See selling in South Jersey and New Jersey foreclosure.

How can Vivid help?

Vivid Properties is a local, family-owned real estate investment company on Amber Street in Kensington. We buy houses for cash, as-is, across Philadelphia, the Pennsylvania suburbs and South Jersey, liens and back taxes included.

You get a fair written cash offer, usually within 24 hours, and you pick the closing day. We pay all the closing costs, with no agent commissions and no fees from us. What still comes out of the price is only what you already owe against the house: the mortgage payoff, the liens, and any unpaid taxes or bills. A cash, as-is offer is usually below what the house could bring fully repaired, because we take on the repairs and the risk. If an OOPA or a listing would leave you better off, we will tell you.

Get my cash offer Text or call (267) 551-5554

Frequently asked questions

This guide is general information, not legal or tax advice. For your situation, talk to a Pennsylvania or New Jersey attorney or tax professional.