✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
Yes, you can sell a house with a lien on it. It’s worth noting that approximately 0.23% of properties in the U.S. were in foreclosure in 2023.
As a homeowner eager to sell, the presence of a lien can cause worry, particularly with the threat of foreclosure looming. However, with the right approach, selling a house with a lien is not impossible.
If you are looking to expedite the sale process especially when faced with the challenge of a lien, Houzeo offers a streamlined solution. Our innovative platform provides a fast track to listing and selling homes and minimizes the delays and legal entanglements associated with liens.
What Is a Lien?
A lien means a lender has the right to keep your property if you don’t pay back the money you owe. It is essentially the right of interest a lender has on a borrower’s property until the debt is repaid.
Liens are associated with secured debts where the borrower’s property is pledged as collateral. Mortgages on real estate are a common example.
When you want to sell a house with a lien on it you would usually have to clear the lien first.
Types of Liens
Here are the four most common types of property liens:
- Mortgage Lien: They occur when you use your home as collateral for a mortgage loan. If you decide to sell your home, the mortgage lien must be paid off from the sale proceeds.
- Mechanic’s Lien: This is a lien placed by contractors or builders who have not been paid for their work. You need to clear this debt before you sell.
- Tax Lien: Tax liens are imposed due to unpaid property or other owed taxes. You will have to clear this lien before you proceed with the sale.
- Judgment Lien: They arise from court rulings against you for unpaid debts or damages. You can settle this out of pocket or via the sale proceeds.
Steps to Sell a House With a Lien on It
Selling a house with a lien calls for a well-thought-out approach. Here’s how you can go about it:
1. Identify and Confirm the Lien
You may have a lien on the property without you knowing about it. Maybe a creditor filed it without warning you, or you unknowingly inherited it when you bought the house.
In any case, the lien information is available online. For a small fee, you can access these records via your county recorder, county assessor, or local courthouse.
Websites like PropertyShark also host lien-related information that you can access for a fee. Alternatively, you can also get an owners and encumbrance (O&E) report through a title company.
2. Dispute or Negotiate the Lien
If you feel that the lien is wrongful, you can dispute it. It’s recommended you hire an attorney as doing so may require you to be present in court.
You can negotiate the settlement amount with your creditor with the help of a lawyer. If it’s a mechanics lien, you can dispute it as per your state’s laws. For instance, if a mechanic didn’t file a lien quickly enough, you can dispute it.
Tax liens are a bit complicated. But with the help of a lawyer, you can get a certificate of discharge issued from the IRS.
If the buyer is ready to shoulder the burden, you can also negotiate the lien cost into the sale price. Many investors and buyers are ready to buy houses with a lien to get a bargain. This can be a win-win situation for you.
3. Pay off the Lien
If you do have a lien on your property, settling it out of your pocket is the most straightforward and safe approach. This will clear the title of any encumbrances and prevent any hiccups during selling.
You can also opt to borrow the equity you have in your house to pay off the dues.
4. Obtain a Release of Lien
When you settle the dues, make sure you get documented proof of the release of the lien. It’s usually issued as a lien discharge or lien termination form.
5. Review Selling Options
Now that you have sorted out the lien situation, you can think about ways to sell your home. There are a few options- the traditional real estate agent route or a For Sale By Owner(FSBO) sale.
For a more straightforward and streamlined approach, you can choose flat-fee MLS platforms like Houzeo. Houzeo helps you list and sell your property and makes the process easy with advanced technology.
Bottom Line
Selling a home with a lien attached might seem complicated, but it’s entirely possible with the right approach and resources.
You can settle the lien out of pocket or use the proceeds from the sale. If you think the lien is wrongful, or if you inherited it unknowingly, you can always dispute it.
It’s recommended that you negotiate with your buyer and build the lien settlement in the house sale. Whether you decide to dispute or negotiate, do it through a real estate attorney. Look out for the best real estate attorneys near you on Houzeo’s list of vendors.
Frequently Asked Questions
How long does a lien stay on your property?
The lien on your property usually goes away once you settle your dues, if it's a mortgage lien. Mechanics liens will usually last between 90 days and a year before they expire. Tax liens can stay on your record for up to 10 years or more. However, in some cases, liens also expire.
Is a lien on your house bad?
Yes, a lien on your house can be bad. For starters, won't be able to sell the house without settling it before or directly after the sale. Even if you find a buyer who is ready to buy your house with a lien, you won't get the full fair market value of your house.
How can I remove lien from my property?
You can remove the lien from your property by settling the lien upfront, paying the dues from the proceeds, or discrediting the lien. You can also negotiate with the buyer and include the lien settlement into the sale price.
