One of the most common questions we hear from Sioux Falls homeowners is some version of: “I want to sell, but I owe back taxes” or “there’s a lien on the property — can I still sell it?”

The short answer is yes. In most cases, you can sell a property that has liens or unpaid taxes — but there are important details you need to understand first.

What Is a Lien?

A lien is a legal claim against a property, typically because of an unpaid debt. Common types of liens on residential properties include:

Mortgage liens — the most common; your lender holds a lien until the loan is paid off
Property tax liens — placed by the county when property taxes go unpaid
Mechanic’s/contractor’s liens — filed by contractors or subcontractors who weren’t paid for work performed
Judgment liens — court-ordered claims resulting from lawsuits
HOA liens — filed by a homeowners association for unpaid dues
IRS or state tax liens — federal or state government claims for unpaid income taxes

Liens are recorded in the public record and are attached to the property, not just the owner. This means they follow the property through a sale — which is why they must be resolved at or before closing.

What Happens to Liens at Closing?

In a standard real estate sale, the title company does a title search before closing. This search surfaces all recorded liens against the property. Before the sale can close, every lien holder must either:

Be paid off at closing from the sale proceeds, or
Agree in writing to release the lien (sometimes possible through negotiation)

This process happens whether you’re selling to a retail buyer through an agent or to a cash buyer. The mechanics are the same — the difference is in the timeline and flexibility.

Can You Sell if the Liens Exceed the Home’s Value?

This is a harder situation, but it’s not necessarily a dead end. If the total debt against the property exceeds what a buyer will pay, you have a few options:

Short sale. You sell the home for less than the total debt owed, and the lender(s) agree to accept less than the full payoff. Short sales require lender approval and can take months, but they’re a legitimate option to avoid foreclosure. Working with an experienced local buyer makes this process smoother.

Negotiate lien reductions. Certain lien types — judgment liens, contractor liens, IRS liens — can sometimes be negotiated down. A real estate attorney can help you approach lien holders about a discounted payoff.

Consider bankruptcy. In some situations, bankruptcy can discharge certain liens or restructure debt, making a sale viable. This requires legal counsel.

Back Property Taxes in South Dakota: What You Need to Know

Unpaid property taxes in South Dakota become a tax lien on the property. Here’s the specific timeline:

Property taxes are due on April 30 and October 31 each year in Minnehaha County
If taxes go unpaid, a tax certificate can be sold by the county to investors
After 3 years of unpaid taxes, the tax certificate holder can begin a tax deed process to take ownership of the property

If you’re behind on property taxes, selling sooner is almost always better than waiting. Every year of delinquency adds interest and penalties — and the tax deed process, once started, can result in losing the property entirely with no proceeds to you.

In a cash sale, back taxes are typically paid off at closing out of your sale proceeds. You don’t need to come up with the money upfront — it’s handled by the title company at the time of sale.

What to Do Before You Sell: Getting a Clear Picture

Before contacting buyers or agents, it’s worth getting organized:

Request a payoff statement from your mortgage lender. This gives you the current balance owed, including any penalties.
Check the Minnehaha County Treasurer’s office for back taxes. You can look up delinquent tax amounts online or by calling the county directly.
Run a title search or ask a title company for a preliminary search. This will surface any liens you may not be aware of. Surprises at closing slow everything down.
Talk to a real estate attorney if the situation is complex. Judgment liens, IRS liens, and mechanic’s liens often have specific resolution procedures that an attorney can help navigate.

Why Cash Buyers Are Often the Best Option for Encumbered Properties

Traditional buyers financing through a lender face significant hurdles when a property has title issues. Lenders require clean title before they’ll fund a loan — meaning any unresolved liens can kill a conventional sale outright.

Cash buyers don’t have this problem. We don’t need a lender’s approval, and we’re experienced with title issues, back taxes, and lien resolution. In many cases:

We can structure the purchase to pay off liens directly at closing
We can close faster, reducing additional penalties from accruing
We’re willing to work with properties that conventional buyers won’t touch

If your Sioux Falls property has liens or back taxes and you want to sell, the first step is understanding exactly what you owe. The second is getting a cash offer and running the math — in many cases, the sale proceeds more than cover the encumbrances, and you walk away with cash even after everything is paid off.

Call us at (605) 853-8776 or get a free cash offer here. We’re happy to walk through the numbers with you with zero obligation.

How to Sell a House with Liens or Back Taxes in South Dakota