If you have a lien on your home, you may be worried about finding a buyer and making it to closing. Fortunately, you can sell a house with a lien on it, but there are some caveats.
A house with a voluntary lien (like a mortgage lien) can be sold as normal. The lien is handled when the mortgage is paid off. However, an involuntary lien (like a tax lien) can complicate the sale and needs to be cleared before closing.
An experienced real estate agent can help you navigate selling a house with a lien on it. If you don't have an agent already, we can connect you with top agents in your area. Simply fill out a short form, and we'll send vetted agent recommendations straight to your inbox.
What is a lien on a house?
A lien is a legal claim on a house (or other asset) that helps ensure a creditor receives payment.
For example, if you fail to pay back a debt, a creditor can place a lien on your home. And if you continue not to pay, the creditor can claim your house as payment. The idea usually isn’t to take your house. Generally, the creditor would prefer that you just pay back the debt so everyone can move on.
One of the most common liens isn't typically thought of as one — a mortgage. This is known as a voluntary lien, because you enter into it by choice. Most other liens against property are considered involuntary, because they’re part of a judgment against you, not something you choose.
Here are some types of property liens:
- Mortgage (voluntary): If a homeowner has a mortgage, the lender can foreclose on the home if the borrower stops making mortgage payments.
- Tax (involuntary): A tax lien arises due to failure to pay taxes, typically income tax or property tax.
- Judgment (involuntary): This lien is put in place when a creditor sues and the case goes to court. If the judge rules in favor of the creditor, the creditor can file a lien against the debtor’s property.
- Contractor's (involuntary): A contractor’s lien, sometimes referred to as a construction lien, can be attached to property if the owner fails to pay contractors for their work.
- Municipal utility (involuntary): This lien can be the result of unpaid utility bills, such as trash, water, or sewer bills.
- HOA (involuntary): An HOA lien is due to unpaid homeowners association (HOA) dues.
How to find out if there's a lien on your house
In many cases, you’ll know there's a lien on your home because parties disclose that they’ve placed one or have intent to place one on your property. In fact, disclosure is required in many states. However, things happen — either someone didn’t disclose the lien, or it slipped through the cracks. Fortunately, liens are public records, so it’s easy to check for liens on your home.
To check public records, you’ll need to go through your county’s clerk, recorder, or assessor. Many counties have online search tools, but others may require you to call or visit the county clerk’s office. They can run a property lien search and let you know if anything turns up for your home. Since liens are public records, the search itself is free, though you may need to pay a fee for a copy of the report (this depends on the county).
Alternatively, you can opt to have a title company handle the search for you. They’ll take care of the legwork, but you’ll have to pay for the service. Property title searches from a title company can cost $50–150,[1].
How to resolve a lien so you can sell your home
Typically, liens need to be resolved before selling a home. This is because most traditional buyers need financing, but most lenders won’t approve a loan on a property with outstanding liens. The house lien gives the lienholder a legal claim to the property, which introduces a lot of risk for the lender. Many offers also have a clear title contingency that requires the title to be free of liens.
The process of resolving a lien can vary somewhat depending on the type and how it was placed on your home. But generally, it’s as simple as paying off the debt associated with the lien.
If that’s not an option, you may be able to negotiate with the creditor to reduce the balance owed. Filing for bankruptcy may also help resolve liens, although that’s generally the last choice for anyone.
If you think the lien is invalid, you can contest it in court. This process can be complex, so it’s best to contact a real estate attorney for advice if you decide to go this route.
Mortgage liens are typically paid off in the process of the home sale. In a typical real estate transaction, the proceeds of the sale are used to pay off the existing mortgage, which clears the lien. If the buyer took out a mortgage, they then have their own lien on the property associated with that loan.
How to sell your house with a lien still on it
You can sell a house with a lien on it, but the lien needs to be taken care of in the process, which means either you or the buyer will be responsible for paying the debt. If you don't pay it, the listing agent will need to disclose the presence of the lien to any potential buyers.
If you have enough equity in the house, the simplest way to handle a lien is to use the proceeds from the sale to pay the debt and clear the lien. You can consider this part of the cost of selling the home. Your next best option is to clear the lien by negotiating the debt or disputing it in court, then proceeding with the sale.
If you can't clear the lien yourself, you can go with a cash buyer and request that they pay the debt as part of the purchase. Mortgage lenders won’t finance a home with a lien on it unless it can be cleared in the process, so cash buyers may be your only option for getting out from under the debt.
Selling a home for cash is usually simpler than selling it the traditional way (where the buyer takes out a mortgage), but you’ll need to do your due diligence to ensure the buyer has the funds.
You could also consider selling to a company that buys houses for cash, such as We Buy Houses, instead of an individual investor. These companies buy homes in nearly any condition, including homes with liens attached.
One easy way to find reputable cash buyers is through Clever Offers. Clever Offers is a free service that presents you with offers from fully vetted cash buyers. This can help you compare offers and get the best price for your home. Just answer a few questions about your home to get started.
Bottom line
A house can be sold with a lien on it, but the lien must be cleared in the process, which generally means paying off the debt. This can be done before closing, or it can be done as part of the sale transaction.
If you can't pay the debt yourself, you have other options, like selling to a cash buyer who's willing to clear the lien as part of their purchase.
When selling a house with a lien, you'll likely want the help of a real estate agent. They can provide expert guidance and help you decide the best course of action to take.
FAQ
Is it illegal to sell something with a lien on it?
No, it’s not illegal to sell something with a lien on it. However, you are typically required to disclose the presence of the lien to the buyer; the buyer can take legal action if you don’t. You may also need to get permission from the lienholder, and in some cases, you may need to pay the lien off to finalize the sale.
Do liens have to be paid before closing?
Yes, liens typically need to be paid before closing. In the case of a mortgage, the lien will be taken care of when the existing mortgage is paid off as part of the transaction. In other cases, you’ll either need to handle the lien prior to closing or include provisions to have it taken care of as part of the sale.
Who can put a lien on your house?
Nearly anyone you owe money to can put a lien on your house, including financial lenders, government agencies like the IRS, contractors, and creditors. Anytime you owe money to an entity and they take the issue to court, you run the risk of having a lien placed on your home.
How much does it cost to remove a lien on property?
The cost to remove liens on property depends on the specifics of the lien and the complexity of the case. The most common way to remove a lien is to pay the debt, so in that case, the cost would be whatever the debt balance is. If you’re disputing the lien, you’ll need to cover any legal or court fees involved in that process.
How do you get around a title with a lien?
You can’t “get around” a lien; it needs to be paid back. That means either the current owner or the person purchasing the property with the lien needs to contact the lienholder and settle the debt.
