Is Selling With a Lien on Your Home Possible?

Plenty of issues can slow down, delay, or even kill a real estate transaction, and liens are one of them.

Property liens are basically legal notices that are placed on the title because of some sort of unresolved issue or unpaid debt. If you owe a creditor, they can place a lien on your home until you agree to repay them what they’re owed.

Liens are often the result of either unpaid bills, unpaid taxes, or court judgments. Maybe you’re behind on your mortgage payments or you haven’t fully paid the contractor who renovated your home.

If you currently have a lien on your home and want to sell, you could be faced with some obstacles. Usually, liens will have to be dealt with before the title can be transferred to a buyer and a real estate deal can go through.

What Types of Liens Can Be Placed on Your Property?

There are all sorts of different liens that can be placed on a property, and the following are among the more common:

  • Mechanics lien – Any contractor who does work on your home will obviously want to be paid on time. If this doesn’t happen, they can place a lien on your home in the form of a mechanics lien until they are paid.
  • Judgment lien – If you’ve been taken to court and lost the case, you may owe the winning party some form of payment. Until this payment is made, a judgment lien can be placed against your home.
  • Tax lien – If you are in arrears on your taxes, the government can file a tax lien on your property.

Any liens that are on your property will be listed on the title report, which can definitely turn prospective buyers off. Buyers might even wonder whether or not there are other potential issues with the home as well.

How Can a Lien Impact Your Ability to Sell?

A number of common things happen during escrow after a buyer puts in an offer and you accept it. Before closing, the buyer will need to solidify financing, a home inspection will likely be conducted, and a title search will be done to make sure title is free and clear of any issues.

If a lien is discovered during the title search, the transaction will have to be suspended until the issue has been dealt with. No buyer is going to want to take over a property that has a clouded title.

The buyer’s lender may not agree to approve financing for a property with a lien on it. The lender will likely take a back seat to others with a lien on the property, which places them at risk for not being repaid themselves.

If you have a lien on your home, your best course of action would be to deal with it as soon as possible. Whoever is owed payment and is holding a lien against your home should be repaid in full in order to clear title and be free to sell your home without a hitch. If not, any potential real estate transaction will be delayed or put on hold indefinitely until a resolution is met.

That said, it’s important to make sure that the lien that’s on your property is actually yours. There’s always the possibility that someone by the exact same name or someone else in the family is actually attached to the lien as opposed to you. Mistakes can happen, so you’ll certainly want to verify whether or not the lien belongs to you.

But if the lien is legitimately against your name and property, then you’ll definitely want to deal with the situation right away. Any delay in resolving your lien can make selling your home much more difficult. 

Can You Still Sell With a Lien on Your Home?

It’s not recommended to try and sell a home with a lien on it. However, you choose to do so, you’ll want to work with a real estate professional who has experience with this type of situation.

Any liens against your property will have to be carefully evaluated. You’ll then be tasked with finding a buyer who is actually willing to accept a home purchase knowing that there is a lien on the title, which is not an easy feat.

There is also the risk of the buyer not being able to secure financing, as mentioned earlier.

All in all, it’s much easier to deal with the lien and make the payments as necessary in order to ensure a much more streamlined real estate transaction.

But if you do decide to proceed with trying to sell your home with a lien on it, it will have to be settled at closing so that the buyer will be able to get clear title on the property.

As far as paying and settling the lien is concerned, the money can come from the proceeds of the sale of your home if there is enough equity built up. This will just be added to all the other closing costs that are typical of selling real estate.

But if you owe more on your mortgage than what your home is valued at and there isn’t enough money in the pot to settle your liens, you’ll need to come up with the cash some other way.

If you choose to go this route, it’s recommended that you obtain some advice from the title company on how to proceed. Sometimes it might even be necessary to speak with a real estate lawyer if things are more complicated.

Most buyers will expect no liens on a property, and if there are, they’ll expect them to be paid off to make sure they get clear title.

The Bottom Line

Selling a home can be a bit stressful and even overwhelming at times, and throwing in a lien can just exacerbate things. If it is discovered that there is a lien on your home when you try to sell, you’d be well-advised to deal with it as soon as possible. Most buyers will probably bail out on a deal if a lien is discovered.

If you’re in this situation, team up with a professional agent who is well-versed in handling liens on properties to help you deal with these often complex scenarios in the best way possible.