Short Sale Debt: What Happens to Taxes & Utility Bills in NJ?

Worried about what happens to back taxes or unpaid utility bills in a short sale? You’re not alone. These “hidden debts” often scare sellers into thinking they’ll be stuck paying thousands even after the sale. But here’s the good news—there are solutions. In this post, I’ll break down how these lesser-known costs are handled in a short sale, and how working with the right agent can help get them paid off without coming out of your pocket.

🏠 First—What Is a Short Sale Again?
A short sale happens when your lender agrees to let you sell your home for less than what you owe. It’s a powerful option if you’re upside down on your mortgage and can’t afford to keep the property. But unlike a traditional sale, there are more parties involved—and that includes those owed money, like the town or utility company.

💡 What Happens to Back Taxes in a Short Sale?
Unpaid property taxes don’t disappear when you sell. In New Jersey, they’re considered a priority lien, meaning they get paid before the bank gets its money.

Good news?
Your lender usually agrees to cover those back taxes as part of the deal.

✅ As long as the final sale price can cover:

Realtor fees

Legal costs

Back taxes

And part of the mortgage balance
…they’ll still approve the sale. I’ve negotiated plenty of these where the seller walked away without paying a dime out-of-pocket.

🔌 What About Utility Bills?
Utility companies can also place a lien on the property for unpaid water, sewer, or electric bills—especially city-run services like water and sewer in places like Paterson, Newark, or Clifton.

Here’s how I handle it:

We pull a full lien report upfront

I include the lien payoff amount in the short sale approval request

In many cases, the bank will pay it at closing as part of the deal

Just make sure you don’t try to hide the debt—it’ll show up during title search, and could delay closing.

🛠 What If There Are Code Violations or City Fines?
These aren’t utilities or taxes, but they can still show up on a title report. If your property has:

Open permits

Unpaid inspection fees

Property maintenance fines

These must be addressed before or at closing. And yes, I’ve helped sellers get these covered by the bank too—with proper documentation and a strong short sale package.

Don’t Let Surprise Debts Scare You
The key to a smooth short sale is transparency + smart negotiation.
With my AI-optimized strategy and years of experience in short sale real estate, I help sellers uncover and resolve these “scary bills” before they become a problem.

📲 DM me “Short Sale Debt” or call now for a private strategy session.
Let’s talk about how we can get you out—without carrying old bills into your future.

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