Selling a house with a lien can be daunting to your sale proceeds because most home buyers prefer buying a house without an outstanding debt and a clean title.
However, this article will help you to sell a house with a lien recorded!
You must pay your property liens and find a qualified buyer at the closing table.
If you are interested in selling a house, read this article!
Can You Sell Your House if You Have a Lien on It?
If you need cash to settle your other financial obligation, selling a house with a lien will be your only choice.
If you are confused about whether you can sell a house with a property lien, worry no more because YES! The good news is that a property with a lien can still be sold.
However, difficulties can arise, and there may be a chance that a seller will lose money if the house has unpaid property taxes.
What Is a Property Lien?
A “lien” is a straightforward legal term that asserts the owner of the property as stated on the home’s title.
It indicates that the house is being used as security against a specific debt when a property owner fails to pay property taxes.
Mortgage companies are the most prevalent types of lienholders, which explains why mortgage liens are prevalent these days.
Liens come in two different kinds, and these are:
- Voluntary lien: A voluntary lien is one that the owner of a piece of property voluntarily grants to mortgage liens as security for the payment of a debt.
- Involuntary liens: Liens put on a property by an outside authority against the owner’s will are known as involuntary liens.
Liens are indeed risky, so if you are considering putting your house with a lien on the market, you must know these things:
- Any party has the right to place a lien on the property: If you have a house with a lien and are planning to sell the house, the title company and mortgage lenders will have the right to possess it if you happen to fail to pay property taxes on your payment plan.
- It may take time to sell a house with a lien: The seller and its real estate agent will discover that it is nearly impossible to complete the home sale of a property with a lien or liens placed against it until the liens have been paid off. Property owners must coordinate with their real estate agents to pay taxes in this situation. But if things are not going your way, contact your real estate attorney or a county clerk for legal action.
Hence, a lien is a legal notice attached to your property title because of an unpaid debt.
Property liens work in a LEGAL CLAIM against property granted by the court judgment to a creditor when a debtor does not pay their debts.
Liens are filed in the county clerk’s office and will be sent to the property owners to give notice of repossession of the asset.
It gives the unpaid party a legal claim to a portion of your property when it’s sold, and you typically can’t sell or refinance your property if the lien isn’t cleared.
Types of Property Liens
There are various types of property lien you can get from! However, you must remember that these liens are risky and may put a dead end to your property.
Listed below are different kinds of property liens.
1: Home Equity Lien
A mortgage lien is the most prevalent kind of lien.
Every time a mortgage lender extends a loan secured by real estate, they acquire this lien.
This lien is one of the many documents that homebuyers sign when closing on a house; it is voluntarily granted by the owner of the property when they close on their loan.
2: Tax Lien
When an owner doesn’t pay their real estate taxes, a particular lien known as a tax lien is placed against the asset.
If the tax lien is not paid for an extended period, the municipal government may order the sale of the property to recover back taxes, interest, and penalties.
NOTE: Property tax liens expire for 10 years.
3: Mechanic’s Liens
A mechanic’s lien can be placed against your property if you hire someone to work on your property but fail to pay them under the terms of your contract.
A mechanics lien, also known as a materialman lien, construction lien, or contractor’s lien, may be filed by suppliers of materials to a job site.
4. Internal Revenue Service Lien (IRS Lien)
The federal government files IRS liens against properties whose owners do not pay their income taxes.
These liens are frequently a component of the government’s all-encompassing effort to stake claims against every piece of property a taxpayer owns to recover unpaid taxes.
The government may file to foreclose to satisfy these liens if they go unpaid.
5: Judgment Lien
When a property owner loses a lawsuit and refuses to compensate the other party, a judge may impose a judgment lien on their property.
The claimant may file liens against your assets, including real estate, if you are sued, win the case, and fail to make payment.
Without paying them first, you won’t be able to sell the property or use it as collateral for a loan. Additionally, the lienholder has the right to file for foreclosure if you don’t pay the lien.
However, if you want to put a good fight on your property, you may hire a real estate attorney with agent fees.
Hence, a general judgment lien is recorded against a real estate when a judge issues a judgment against a property owner who loses a lawsuit.
A property tax lien will be a downside to your home sale as homebuyers seek to ensure a lien-free home.
6: Child Support Lien
Child support liens are granted when a property owner doesn’t pay child support as directed by the court.
Like other judgment liens, these liens must be ordered by a court to be imposed.
A county recorder’s office will be responsible for tracking your responsibility. Failure to comply will lead to repossession of your real estate.
7: Homeowner’s Association Lien (HOA Lien)
Owners’ associations have the right to file liens for past-due fees and fines.
If the state and the association’s covenants, conditions, and restrictions permit it, HOAs may begin the foreclosure process even if mortgage payments are current.
What It Means if Your House Has a Lien
A home lien is a claim or legal right against real estate pledged as security for a mortgage loan.
The lender may take the home subject to the lien if the mortgage obligation is not obliged.
Financial institutions, governments, credit card companies, and small businesses can impose liens.
If your house is on a lien, it will be recorded in the records office for potential clients doing a clean title search.
Also, a lien will affect your home sale if you want to sell your house instantly.
However, some buyers are willing to pay for the lien, but the property value will decrease because it does not have enough equity. After all, they are paying for the closing costs.
What Happens if I Don’t Pay the Property Lien?
If a homeowner doesn’t pay existing liens, the lienholder has the right to legally seize and sell the home.
Tax liens are no longer reportable, but other liens that are not your choice could harm your credit. Liens can be lifted by homeowners who arrange payments or pay off debts.
How to Sell a House With a Lien
Liens are usually hard to clear. If you sell your home, you might feel like you’re in a bad situation, but don’t worry; there is still hope!
Listed below is the process of selling a house with a lien.
Step 1: Identify the Lien
You MUST identify what type of lien is held against you or the property that needs to be sold.
Each lien has a different process; some liens cannot be resolved through negotiation. Most liens can be resolved with the involvement of money.
Step 2: Clear the Lien
The quickest and most effective way to clear the title and allow the property to be sold instantly is to pay off the lien, especially if you owe money!
It will clear your public record and will attract more buyers in no time.
Step 3: Find a Buyer
Finding a buyer will not be difficult if you need to pay off the lien. However, if your home is STILL on a lien, it might be challenging to find a potential buyer.
Find a buyer who appreciates your need to sell your house as-is and has the skills to obtain lien releases and bargain for lower settlements.
If the buyer is prepared to pay off the lien at closing or the sale proceeds satisfy the lien before you get your share, you can sell your property with a lien attached.
However, the value of the property will decrease in this matter.
Step 4: Hire a Real Estate Agent
This option is entirely OPTIONAL. Hiring a professional to do the work is not recommended when you think things are going smoothly.
However, if you are new to this situation, an experienced professional can provide guidance. But this comes with a fee.
How to Do a Property Lien Search
If you are a potential home seller and want to ensure that the property you sell is lien-free, listed below are the process for a lien search.
1: Conduct Title Search
A title search is a public record made by the title company, so it is not difficult to hire an agent to do some research for you.
Also, you can go to your county records office if you want a fast process, as the county recorder’s office handles all liens.
2: Pay Existing Liens
If you want to sell a house instantly, you MUST pay your debt before the potential buyer knows it.
It may be a tax lien, business taxes, mechanic’s lien, or other liens. Whatever lien there is, pay it on time to avoid a foreclosure of your home.
3: Negotiate With Lien Holder
If you have difficulty paying your debt in full, you MUST contact the lienholder.
Negotiating is one of the best ways to pay off your lien release, as the lienholder will offer you a payment plan you can cope with.
Frequently Asked Questions
Listed below are the possible questions you might ask when selling a house with a lien!
How Long Does a Lien Stay on Your Property?
It DEPENDS! All states have different laws, and the longevity of your lien varies. If you wish to know, click here.
Do Liens Expire?
Lien expires SIX YEARS after the judgment has been made. With this, you must pay off the lien within the time frame to avoid the risk of repossession.
Does a Lien Affect Your Credit Score?
Yes! A lien negatively affects your credit score, making it more difficult to obtain loan financing in the future.
Is It Bad to Have a Lien on My House?
Yes! Having a lien on your house puts a risk on your home. If you fail to make payments, lien holders will repossess your house.
Also, it can harm and decrease your credit score.
A difficulty may arise if you plan to sell a house with a lien. Most homebuyers prefer buying a lien-free home without the debt of the previous owner.
However, it is STILL POSSIBLE! All you need to do is pay off the existing lien or find a capable buyer to help you with your debt proceeds!
However, the value of your property will decrease as they participate in the closing process.