Can Delinquent Taxes Affect the Closing of a Property in Texas?

Delinquent property taxes can absolutely affect the closing of a real estate transaction in Texas. In fact, they can delay or derail the sale altogether.

If you’re buying or selling a home, it’s important to understand how outstanding property tax debt shows up during the closing process and what you can do to resolve it before it becomes a dealbreaker.

How Property Taxes Are Handled at Closing in Texas

In Texas, property taxes are paid in arrears. That means the bill for the current tax year isn’t due until the end of the year — typically by January 31 of the following year. 

However, during a real estate closing, the title company will calculate a prorated amount based on how long the seller owned the home during the year.

This prorated amount is usually credited to the buyer at closing, who will then be responsible for paying the full tax bill when it comes due.

But if there are delinquent taxes from previous years, it’s a different story.

What Happens If There Are Delinquent Taxes?

Unpaid property taxes are considered a lien against the property, and liens must be cleared before a clean title can be transferred to the new owner.

Here’s what typically happens:

• The title company will flag the delinquency. This happens during the title search. Any outstanding taxes will show up as liens that must be paid before the sale can close.

• The seller will usually be required to pay the delinquent amount. If they can't or won't, the buyer may walk away or negotiate a price reduction to cover the tax bill.

• The sale can be delayed or fall through. Until the taxes are paid and the lien is released, the title company won’t issue title insurance — and most lenders won’t close without it.

Can a Buyer Pay the Delinquent Taxes?

In some cases, the buyer may agree to pay the delinquent taxes as part of the closing terms. This is more common in distressed sales or investment deals. If that happens, it must be clearly documented in the closing statement.

However, buyers should be cautious. Delinquent taxes may be a red flag for other financial issues, such as unpaid utility bills, HOA fees, or additional liens.

How to Avoid Surprises at Closing

Whether you’re a buyer or seller, here are a few ways to avoid a last-minute surprise:

• Order a preliminary title report early. This will reveal any liens or tax issues.

• Stay current on property tax payments. If you're the seller, make sure everything is paid before listing your property.

• Work with a knowledgeable real estate attorney. They can help resolve any title issues and make sure the closing proceeds smoothly.

Don’t Let Unpaid Taxes Derail Your Closing

Delinquent property taxes are a financial inconvenience and legal barrier to transferring ownership. If you’re dealing with a real estate closing in Texas and tax issues come up, it’s important to act quickly and understand your rights and responsibilities.

At LDG PLLC, we help buyers, sellers, and investors navigate complex real estate transactions and resolve title issues. If you’re facing a delayed closing due to delinquent taxes, we can help you find a solution.