Tax liens?

It's not a big deal for you as a buyer, unless it's so large that the seller isn't receiving enough funds at closing to pay it and any other debts against the property.

It will need to be paid by the seller at closing to provide you with clear title.  That's why a title search should be done before any real estate transaction.  I'm guessing that's how you found out about it?

Moonrocket, do you know what type of tax liens?  If IRS liens, yes, as previously noted, they would be paid out of the seller's proceeds at closing.  However, if there are insufficient seller proceeds to pay other prior liens plus the IRS tax liens, than the seller would either: (1) need to bring additional funds to closing to cover the liens; or (2) request the IRS release the liens on the property to permit the property to sell. 

This happens with some degree of regularity, but it is a process to procure the IRS' release of the lien.  It obviously doesn't relinquish the underlying debt, just the attachment of the debt onto the property.  Typically, the seller or their attorney, accountant ... etc., would demostrate to the IRS that the property is worth X, you the buyer are an arms-length purchaser, the proceeds from the sale will not pay off the existing debts and their lien - and then the IRS would release their lien to permit the closing to proceed.  Again, its not a 100% guarantee, but in my practice, this is not an outlandish request and the IRS is used to receiving these. 

However, if the property is encumbered by real estate tax liens, those are super-priority liens that trump even any underlying mortgage of the seller (the reason most lenders not collect tax payments in escrow from your monthly payments).  Those would have to be paid off as part of the closing. 

Hope this helps.

Thanks!  We got hold of the title company who had not listed them (but we found out from the neighbors and confirmed with local government.)  They said they didn't include them b/c they will take care of them out of the proceeds so it should not be an issue.

Thank you everyone for your help!