Can you sell a house with a lien on it?

Can you sell a house with a lien on it? How it works

A lien is a legal claim against property that secures a debt. Your mortgage is a lien. So is a property tax lien, a judgment from a lawsuit, or a contractor's mechanic's lien. When you sell a house with a lien, the buyer's title company finds every recorded lien, asks each creditor for a payoff, and pays them from the proceeds at closing. The creditors then record releases, and the buyer receives clean title.

In other words, you don't usually need cash in hand to clear liens before you sell. You need enough sale proceeds to cover them, or an agreement from the lienholders to accept less.

Liens attach to the property, not just to you. That's why a buyer won't close until each one is paid or released: otherwise the debt would follow the house to its new owner. It's also why a title company's search is the step that matters most when there are liens.

Common types of liens on a house

Liens come in two broad kinds: voluntary liens you agreed to, and involuntary liens a creditor or government placed on the property.

The order in which liens get paid is called priority. As a general rule, property tax liens come first, followed by other liens in the order they were recorded, though state law and specific statutes can change that. Priority matters most when the sale won't cover everything, because lower-priority lienholders are the ones asked to take less.

• Mortgages and home equity lines of credit (voluntary liens you agreed to)
• Property tax liens for unpaid real estate taxes, which in most places take priority over other liens
• Federal or state tax liens for unpaid income or other taxes
• Judgment liens from a court case a creditor won against you
• Mechanic's or contractor's liens for unpaid work or materials on the house
• HOA or condo association liens for unpaid dues or assessments
• Municipal liens for code enforcement fines, water, sewer or demolition charges
• Child support liens, in some states

Is there a lien on my house? How to check

If you're asking whether your house has a lien, start with the county recorder, register of deeds or clerk's office where the house is located. Many counties let you search recorded documents online by owner name or parcel number. Check the county treasurer or tax collector for unpaid property taxes, and your city for code or utility liens, which aren't always in the same index.

The most reliable answer comes from a title search. A title company searches the public records and lists every lien and judgment it finds before closing. If you're planning to sell a house with a lien, ask for a preliminary title report early, so there are no surprises in the final week.

You may also find liens you didn't know about, for example an old judgment from a medical bill or a contractor's lien a previous owner left behind. Don't panic. Many can be resolved by a payoff, a negotiated release, or proof that the debt was already paid. The sooner you know, the more options you have.

Selling a house with liens when there's enough equity

If the sale price covers your mortgage, every lien, and your closing costs, selling a house with liens on it is straightforward. The settlement statement will show each payoff as a line item, and you receive what's left. Ask creditors for written payoff statements good through the closing date, because interest and fees can keep adding up.

Sometimes a lien is old, already paid or recorded in error. The title company may need a release from the creditor or proof of payment. If a creditor can't be found, the title company may have other ways to resolve it, but that can take time, so raise it early.

Keep copies of every payoff letter and release. If a creditor later claims it wasn't paid, the settlement statement and the recorded release are your proof.

Can you sell your house with liens on it if you owe more than it's worth?

Yes, but the lienholders have to cooperate. Many creditors, especially judgment holders and some lenders, will accept a reduced payoff to release a lien when the alternative is getting nothing. A mortgage lender's version of that is a short sale. Ask for any agreement in writing, including whether the rest of the debt is forgiven.

For a federal tax lien, the IRS has a process to apply for a certificate of discharge that can release the lien from a specific property being sold. Forgiven debt can be taxable in some cases, so talk with a tax professional before you agree to a settlement.

Liens that need extra attention

Property tax liens can lead to a tax sale if they go unpaid long enough, under timelines set by each state. Code enforcement liens may come with open violations that a buyer will have to fix. Judgment liens can attach to all real estate you own in a county. And liens in a deceased owner's name are handled through the estate. If any of these apply, a real estate attorney can help you sort out the order of payment.

Some liens, like a child support lien or a lien in favor of a state agency, may require a specific release form or approval process. A judgment that has expired under your state's rules may still show up in the records and need paperwork to clear. The title company will tell you what each creditor needs, but it helps to start gathering contact information for creditors as soon as you decide to sell.

Steps to sell a house with a lien on it

If you're ready to sell a house with a lien on it, a little preparation saves weeks later. These steps work whether you list or sell directly.

• Pull the recorded documents for your property from the county, or ask a title company for a preliminary report
• List every lien with the creditor's contact information and the amount you believe is owed
• Request written payoff statements, and dispute any amount you believe is wrong in writing
• Estimate your net: sale price minus mortgage payoff, liens, closing costs and any commission
• If the numbers come up short, ask lienholders in writing whether they'll accept a reduced payoff
• Give the title company everything you have, so they can order releases before closing

How to do a property lien, and why it matters to sellers

Some people searching this topic want to know how a lien gets placed. In general, a creditor records a lien with the county after a court judgment, an unpaid tax assessment, or unpaid work under the state's mechanic's lien law, each with its own rules and deadlines. As a seller, what matters is that recorded liens show up in the title search, so being upfront about the ones you know about keeps a sale on schedule.

When a direct cash sale fits a house with a lien

A direct cash sale can fit when the liens are tangled up with other problems: repairs, back taxes, code violations, an inherited title, or a tight deadline. A buyer that regularly closes on houses with liens works through the payoffs with the title company. If the house is in good condition and the liens are simple, listing may net more. Compare your net after every payoff on each path.

Whichever way you sell, don't try to hide a lien. It will appear in the title search, and a buyer who finds it late may walk away or ask to renegotiate. Being upfront lets the buyer and title company plan the payoffs from the start.

Selling a house with a lien on it to Prominent

Prominent Cash Offer buys houses directly, as-is, including houses with liens and back taxes. Share the address and what you know about the liens; if the property is a fit, you'll get a written cash offer with the amount and terms spelled out. Liens are paid through the title company at closing. There are no fees or commissions, we pay the closing costs, and you choose the closing date. There's no obligation.