Can you Sell a House With a Lien? Everything you Need to Know

It’s not possible to sell a home with a lien on it—first you need to resolve it. There are many ways to do this.

A lien on your property represents a creditor’s legal interest in your home. It usually means you owe money, and the person or entity you owe is holding your house as collateral. The lien holder is the party that has a legal claim over the property due to unpaid debts. Since you can’t sell something you don’t entirely own without clearing your debts, you’ll need to either dispute or resolve the lien before you sell. But it’s possible to use the proceeds from the sale of your home to remove the lien.

You could have a lien on your home and not even be aware of it. Some common types include voluntary liens and involuntary liens:

• Home equity loans, which are voluntary
• Contractor liens (or mechanic’s liens), which are debts for work performed on your home
• Unpaid tax liens from the IRS or state or local governments
• Judicial liens for court judgments against you
• HOA liens from unpaid association dues

Voluntary liens, such as home equity loans, are created by property owners through agreements to secure loans. In contrast, involuntary liens, like unpaid tax liens or judicial liens, are imposed without the homeowner’s consent due to unpaid debts or legal obligations.

Certain types of liens expire after a period of time. It depends on the laws in your state. Sometimes there are also errors in county records, so it’s possible to dispute a lien. It’s also possible to reach a settlement with the creditor and remove the lien for less than you owe.

Property liens are one of the reasons pending home sales sometimes fail. But if you know what you’re dealing with, you can avoid issues and achieve a smooth transaction.

The process will depend on the type of lien and the laws in your state. Consulting a real estate attorney can provide valuable legal guidance in resolving liens. But in general, you’ll need to either dispute or resolve the lien, and you may need legal help to do so. A tax lien, imposed by the government when property taxes remain unpaid, can get especially complicated, so always talk to a lawyer for the best results. Here’s what you can expect.

1. Discover and validate any liens on your property
2. Dispute or negotiate the lien with legal help
3. Pay the lien and clear the title
4. Review options for selling your home
5. Be transparent throughout the process
6. Get cash offers

It’s possible a creditor filed a lien against your property without notifying you. A judgment lien is recorded against real estate following a court judgment for unpaid damages. Another potential occurrence is that there was one on your house before you inherited it or bought it through auction.

The good news? This information will be publicly available. You can typically search for liens on your address with your local clerk, county recorder, or assessor’s office website.

You can also use a website like PropertyShark to find any liens on your property for a fee. Alternatively, you can order an Owners and Encumbrance (O&E) Report from a title company. The next step will depend on your current financial situation and whether the lien is valid.

If you’re going to dispute the lien or attempt a settlement, you should consult with an experienced legal professional. If you believe your lien is not valid or is not legal, your attorney can file a spurious lien action in court. Tax liens can get especially complicated, so always talk to a lawyer for the best results. They’ll make sure you can get a certificate of discharge from the IRS and ensure that this process is done by the book.

Another thing to note: laws around mechanic’s liens vary by state, so it’s a good idea to consult a lawyer if you think the lien may not have been filed legally. For example, if your contractor didn’t file the lien quickly enough after the work was completed, you might be able to dispute it.

You can offer to negotiate a settlement with your creditor with the help of a lawyer. Then, your lawyer will make sure the creditor agrees in writing to release the lien once you’ve paid the agreed upon amount. If you’ve already paid a lien but it’s still showing up in public records, get in touch with the appropriate party and provide evidence of a lien release.

Once the liens are taken care of, you’ll need to come up with a plan to sell. Liens due to unpaid property taxes must be resolved before selling the home to ensure a smooth transaction. Depending on your situation, you may decide to sell with a traditional real estate agent who will market your home on the local Multiple Listing Service (MLS). If your house is in market ready condition, this could make a lot of sense. However, in instances where you’re looking to sell fast and don’t have money for repairs, there’s a suitable alternative.

Sundae helps homeowners get cash offers from investors with no obligation to accept. Our marketplace creates competition for your home to give you options and the possibility of a higher price. You’ll be able to field multiple offers and sell your house as-is. What’s more, you can close in as little as 10 days.

Here’s what our customers are saying about Sundae.

Nothing kills a deal faster than dishonesty.

No matter how you choose to sell your home, as a property owner, you should disclose to all parties involved that your home has a lien on it prior to going under contract and entering the closing process. Explain how you plan to rectify the situation so you can transfer the title free and clear. Then, update everyone once the lien is paid, and again when you obtain your certificate of discharge or lien release. This will ensure that there are minimal hiccups when selling your home while navigating the lien payoff process.

If you plan to use the sale proceeds to cover your debts, get a payoff letter from the creditor that details how much you owe, and give that letter to your escrow agent. Mortgage payments are often secured by mortgage liens, which must be resolved before the sale. Some of the cash for your house will go towards resolving the situation, but the rest will be yours — you can use it to buy a new home, pay off other debts, or invest in your future.

While this may make a traditional sale even more complex, the process is streamlined when you sell with Sundae for cash. You won’t have to worry about buyers backing out without giving you a chance to clear the clouded title. You could get cash and a quick close without the stress of costly repairs.