Can You Sell a House With a Lien?

In this time of uncertainty, many Americans are considering selling their homes.

Selling your house is a complicated and stressful process even if everything goes smoothly.

What if you have a lien on your property, though? Can you sell a house with a lien against it?

The short answer is yes, but you’ll want to do more reading to learn more about it and the steps you should take.

What Is a Lien on a House?

A lien is a legal right or a claim against assets. These claims are usually used as collateral in order to satisfy an outstanding debt. It acts as a guarantee for an underlying obligation.

An example of an underlying obligation would be repaying a loan. If this obligation is not met, then the lender or creditor might have the right to sieze the asset.

A lien on a house is a lien where your house is the asset. This occurs if an individual doesn’t keep up with certain financial obligations.

Liens can be settled, but if the owner of a home refuses or ignores requests to settle the obligation, it’s possible that the home could be seized from the owner.

Liens on your home can also negatively impact your credit score. Through either settling debts or making payment arrangements, the homeowners can have liens removed.

What Are the Most Common Liens?

There are a number of different types of liens that can be filed against your property. Let’s take a look at the most common property liens.

Homeowners Association Lien

If you have either broken the rules of your Homeowners Association (HOA) or haven’t been paying the fees, the HOA can file a lien against your property.

The quickest and easiest way to make this type of lien go away is to pay the money that you owe. The lien will then be removed from your property.

Department of Revenue Lien

If you haven’t paid state taxes, a Department of Revenue lien can be filed against your property. Of the different types of liens, this one is more serious and might require that you seek the counsel of an attorney or hire a CPA.

Again, the best thing to do is always to pay the lien. If you can’t, there might be other options.

You might be able to substitute collateral for your home. If the lien is on your primary residence, for example, and you also own a rental property, you might be able to transfer the lien. This can help you go through with your sale if it’s essential that you sell your home.

Materialman Lien

This is the easiest lien to rectify, and it’s also the most common. The materialman’s lien is when a contractor or a materials provider hasn’t been paid for work or materials they’ve provided for the home.

The best way to resolve this type of lean quickly is generally to pay the debt. Then you can go ahead and move forward with selling the property.

If the debt is too steep for you to be able to pay off in one chunk, there are also other options. It’s possible that your real estate agent will be able to negotiate adding the lien repayment into the closing costs of the sale. If this happens, though, it’s obviously going to be deducted from the profits you expect to realize from the sale of your home.

IRS Lien

This is the most problematic and serious of all of the types of liens. This is a lien filed by the Internal Revenue Service (IRS) as a result of a homeowner not paying their federal taxes. In order to deal with this type of lien, it is almost always required to hire both a CPA and a lawyer.

The IRS doesn’t make settling this type of lien easy. They have super-priority over all other types of liens. Time-consuming, difficult, and frustrating to settle, it’s very different to have an IRS lien than a materialman’s lien, for example.

The amount of time it takes to deal with an IRS lien can slow down the sale of your home. This means that it’s more likely that the buyer could back out and look for another property.

Do Liens Expire?

There are different laws in every state regarding the statute of limitations on liens. Unfortunately, waiting for the time period to end isn’t the best way of dealing with a property lien. This is because in most states, creditors have the ability to extend a lien by refiling it once the statute of limitations has been reached.

How to Sell a House With a Lien

The best way to resolve a lien in order to move forward with the sale of your house is to pay off any outstanding debts you have and get your title cleared as quickly as possible.

If the debt is more than you can afford to pay, it’s possible you can use the proceeds from the sale of your home to pay the rest of the debt. Your real estate agent will have to write the lien repayment right into the settlement agreement. In this scenario, the lien amount will be taken out of your proceeds.

In many instances, clearing your title is as simple as verifying that the debt has been satisfied and that the satisfaction of this debt has been properly recorded.

Sometimes, though, liens are more complicated. This might require hiring a lawyer and a CPA to help you dispute the liens. The cost of hiring an attorney could still help you save thousands of dollars and also allow the sale of your house to continue going forward.

It’s also possible, as mentioned previously, to transfer the lien to another asset, such as another property.

You can also take out a bond if you can’t afford to pay a lien. This is an expensive way of dealing with the issue, but it can help you move forward with the sale of your home. Essentially, the bond acts as a security for the lien, so you can carry on selling your house with a clean title.

Clearing Your Title as Soon as Possible Should Be a Priority

Having a lien against your property adds a complicating factor to selling your house. In most cases, the best thing you can do is clear your title of the lien by paying off the debts immediately. This can ensure that the lien against your property isn’t going to hold up the sale of your home.

The best way to avoid this problem is to not fall behind on your debts. While this is easier said then done, depending on the type of lien against your property, it could scare away sellers and seriously delay the sale.

How Can You Prevent Title Issues Before They Happen?

There are a number of things you can do to protect yourself against title issues if you plan to sell your home in the future.

Firstly, when you buy a home, purchase title insurance. This can protect you in the case that a previous owner had a lien on the property. When you have title insurance, you are protected from the responsibility of paying for liens that shouldn’t be yours to deal with.

Another thing you’ll want to do is pay your taxes and fees on time. This is, of course, an obvious point. Still, if you’re planning on selling your home in the future, you’ll want to make sure you’re extra on top of all of your taxes and fees.

If you think that there might be a lien on your property, you’ll want to be upfront with your real estate agent about it. Though they aren’t lawyers, they can help direct you towards the next steps, such as talking to your CPA or an attorney.

Selling a House With a Lien On Your Own

It is definitely possible to sell real estate with a lien on your own. However, it’s often time-consuming and stressful, to say the lease.

Whether the lien was filed against your property by the IRS, an HOA, or the bank, they all have the ability to stop you from selling your home before the debt has been settled. They also have the ability to sell the home in order to recover the debt that’s owed to them.

In order to move forward with selling your house on your own, the debt needs to be repaid. Once this happens, the party who filed the lien will issue a Letter of Satisfaction.

But by far the easiest and least stressful option would be to sell your house to a cash buyer such as us and walk away from your lien issues with money in hand.

Keith Sant

Keith is a blogger, entrepreneur, and real estate investor who truly enjoys helping others. He grew up in Washington where he graduated from UW with degrees in Marketing and economics. Besides flipping houses, Keith enjoys snacks, cycling, and hiking the Pacific Northwest with his fiancee Amanda and their boxer Tuna.

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