Can I still sell the house if there are unpaid property taxes, and how are they handled at closing? – North Carolina

Short Answer

Yes. In North Carolina, a home can usually still be sold even if property taxes are delinquent, but the delinquent taxes (plus interest, penalties, and costs) typically must be paid out of the sale proceeds at closing so the buyer receives clear title. Because property tax liens generally have very high priority, closing attorneys and title companies treat them as a required payoff item on the settlement statement. If the property is already in a tax foreclosure process, timing becomes critical and the sale may need extra steps to close before a court sale.

Understanding the Problem

In North Carolina real estate sales, the key question is whether a seller can transfer a house when the county (and sometimes a city) is owed delinquent property taxes, and what happens to those taxes at closing. The decision point is whether the delinquent taxes will be paid and released as part of the closing so the deed can be recorded and the buyer can take title without a tax lien attached. Timing matters most when the taxing authority has started advertising delinquent taxes or has filed a tax foreclosure case in the county where the property is located.

Apply the Law

Under North Carolina law, unpaid ad valorem property taxes become a lien on the real estate and that lien generally outranks other claims. In a normal arms-length sale, the closing attorney orders a tax payoff, collects the payoff from sale proceeds, and sends payment to the tax collector as part of disbursement so the buyer does not take the property subject to delinquent taxes. In many counties, the Register of Deeds may require tax certification (or an attorney-supervised deed statement) before recording a deed when delinquent taxes exist, which effectively forces the delinquent taxes to be handled at closing.

Key Requirements

Identify all taxing units owed: Delinquent taxes may be owed to the county and also to a municipality or other taxing unit, and each payoff must be accounted for.
Get an accurate payoff amount: The payoff should include the principal tax, plus any interest, penalties, and costs that have accrued through the expected closing/disbursement date.
Pay and document the payoff at closing: The closing attorney typically pays the tax collector(s) from closing proceeds and shows the payoff on the settlement statement so title can be conveyed without the delinquent tax lien.

What the Statutes Say

N.C. Gen. Stat. § 105-356 (Priority of tax liens) – Provides that property tax liens on real property are generally superior to other liens and claims.
N.C. Gen. Stat. § 105-362 (Discharge of lien on real property) – Explains that the tax lien continues until taxes, penalties, interest, and allowed costs are fully paid.
N.C. Gen. Stat. § 161-31 (Tax certification) – Allows certain counties to require tax certification before the Register of Deeds records a deed, with an attorney-supervised closing exception that still requires the closing attorney to pay delinquent taxes from closing proceeds.
N.C. Gen. Stat. § 105-385 (Payment of taxes from sale proceeds) – Addresses paying tax liens and certain assessments from sale proceeds in judicial sales and many power-of-sale situations unless sold subject to the lien.

Analysis

Apply the Rule to the Facts: The facts describe a seller who wants to sell quickly but has fallen behind on recent property taxes. Because delinquent property taxes attach to the property as a lien and are treated as a required payoff, the usual path is to sell the home and have the closing attorney pay the delinquent taxes out of the seller’s proceeds at closing. If the sale price is not high enough to cover mortgages, closing costs, and the tax payoff, the sale may not close without additional funds or lender approval.

Process & Timing

Who files: No special filing is required just to sell, but the closing attorney coordinates payoffs. Where: Payoff information typically comes from the county (and any city) tax collector; the deed is recorded with the Register of Deeds in the county where the property is located. What: The closing package includes a settlement statement showing the tax payoff and disbursement, and the deed may include the attorney-supervised statement used in counties that require tax certification. When: The payoff is usually ordered early in the closing process and paid at disbursement on the closing date.
Before closing: Title work is completed to confirm whether delinquent taxes are owed and whether any tax foreclosure action has been filed. If the county has started aggressive collection steps, extra lead time may be needed to confirm the correct payoff through the closing date.
At closing/disbursement: The closing attorney uses sale proceeds to pay delinquent taxes (and any related charges included in the payoff) and records the deed. If the county requires tax certification, recording may be blocked unless the certification requirement is satisfied through certification or the attorney-supervised deed statement and payoff.

Exceptions & Pitfalls

Not enough proceeds to pay everything: Delinquent taxes are not optional at closing; if the numbers do not work, the transaction may stall unless the seller brings funds to closing or negotiates a different resolution.
Multiple tax bills and changing payoff amounts: Interest, penalties, and costs can change the payoff figure. A payoff that is even slightly outdated can create a last-minute shortfall or recording delay.
Tax foreclosure already filed: Once a tax foreclosure action is filed, the case is in the county’s court system and may require additional coordination to ensure the sale closes cleanly and the case is resolved.
Recording requirements vary by county: Some counties use the tax certification process under state law, which can prevent recording without certification or the attorney-supervised deed statement and payoff plan.

Conclusion

In North Carolina, a house can usually still be sold with unpaid property taxes, but delinquent taxes generally must be paid from the sale proceeds at closing because they are a lien with very high priority and can block clear title. The practical next step is to have a closing attorney order an official tax payoff from each taxing unit and plan to pay it at disbursement so the deed can be recorded without the delinquent tax lien.

Talk to a Real Estate Attorney

If there are delinquent property taxes and a fast sale is the goal, a closing plan that confirms the payoff and clears the lien is critical to avoid recording delays and last-minute surprises. Our firm has experienced attorneys who can help explain options and timelines for a North Carolina closing. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.