Can You Sell a House With a Lien on It?
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Selling a house can be a stressful ordeal, and liens complicate the matter even further. If you’re trying to sell a home with a lien on it, you may be feeling confused and overwhelmed. Following is a brief overview of what you should know about property liens and how they affect the home sale process, so you can make the best decisions moving forward.
What is a lien?
A lien is a legal claim attached to a property signifying that it has debts that are not fully paid off. This claim ensures that the creditor who provided the loan in question will receive legal rights to the property if the borrower defaults on their loan payments.
Liens are not always a cause for concern. Most homeowners have at least one lien on their property: their mortgage. However, other types of liens can serve as significant obstacles in buying or selling a home.
What types of liens might be on a home?
Liens fall into two categories: voluntary and involuntary. Voluntary liens, such as mortgages and home equity loans, are liens that the homeowner agrees to upfront. These liens come as no surprise for homeowners and are very common for a property to have.
On the other hand, involuntary liens are liens that a creditor can place on a property without the property owner’s consent. These are the liens that tend to cause trouble for homeowners down the line. Some of the most common involuntary liens are:
If a homeowner neglects to pay income taxes, business taxes, or property taxes, the government can place a tax lien on their property. Failure to pay off a tax lien in a timely manner can lead to the home being sold in a tax sale to fulfill the debt.
A judgment lien occurs due to a homeowner losing a court case against a creditor. These liens can arise from unpaid credit card debt, medical debt, or any other type of loan an individual can take out.
Child support lien:
If a homeowner fails to make child support or alimony payments, the recipient of these payments can take them to court to have a lien placed on their home.
A mechanics lien can be filed by a laborer or supplier responsible for construction work on a property if they are not adequately paid for their services.
How do you find out if a house has a lien on it?
Property liens are public information, so it’s usually not difficult to check for liens on a particular home. In most counties, you can perform property record searches on the county clerk’s website or recorder of deeds.
If you cannot find information about a property online, you can contact the county clerk or recorder of deeds office to inquire about liens on a property. You can also hire a title company to locate the necessary documents for you, but be aware that you will need to pay a fee for this service.
Can you fight a lien on a property?
Sometimes a lienor may fail to adhere to the necessary legal standards when filing for the lien. In these cases, the lien may not be considered legitimate.
If you have evidence that a lien on your property is invalid, you can send documentation indicating the problems with the lien to the lienor and request that they remove the lien. If they do not agree to do so, you may wish to file a lawsuit against them, but bear in mind that legal fees can be costly, and there is no guarantee that you will win.
What should sellers know about selling a house with an existing lien on it?
When selling a property with a lien on it, the value of that lien needs to be paid, whether the money comes out of your pockets or the buyer’s. Therefore, any profits from the home sale must go towards paying off the lien. Only what is leftover afterward will go to the seller.
If you have enough equity in your home to cover the lien before selling, there should be no issue with the home sale. However, if your home equity is too low, you’ll need to sell the home for a high enough price to pay the difference. While a buyer may cover this amount out of pocket, finding a buyer who will agree to such an arrangement is uncommon, so you will likely have difficulty selling as long as the lien is still in place.
What should buyers know about purchasing a home with an existing lien on it?
If the title search on a home you are looking to purchase reveals an involuntary lien, you may wish to reconsider buying. While you might be able to strike a deal with the seller or the lienor, negotiations can take a lot of time and effort, and it will probably be simpler to find a different home without a lien on it.
If you have fallen in love with a property with a lien and don’t want to give up on it, be sure to consult your real estate agent before making any moves.
How does a lien get cleared from a home?
The simplest way to get rid of a lien is by paying it off. This can be done either by selling the property or by paying the amount owed out of pocket. If you cannot afford to cover the cost of a lien in full, some lienors may agree to remove the lien as long as you sign up for a payment plan.
You may also be able to have a lien removed by contacting the lienor and establishing an agreement with them. If the lienor agrees to sign a release form, the lien will go away.
As a last resort, you can wait for the statute of limitations on the lien to run out, but this can take a long time, and certain types of liens can damage a homeowner’s credit score and should be eliminated as soon as possible, so this option is not recommended.
Are you trying to sell a house with a lien?
Liens may turn off some buyers, so selling a house with a lien might be challenging, depending on the lien type and amount. Fortunately, if you’re looking to sell a property with a lien, AMI can take it off your hands. We buy homes in all conditions, including homes with all types of liens on them. Contact us for a no-obligation cash offer today.