Can You Sell A House With A Lien?
You may be wondering if you can sell your house with a lien. Selling a home can be difficult, but it gets even more challenging if you learn that there’s an existing lien on your house.
There are several different types of liens and each has their own remedy. The good news is that you have options.
You will have to make crucial decisions that could drastically shape the progress of the sale – and it’s good to know there are options available in such cases.
What is a Lien?
First, we need to define what we’re talking about. A lien basically means that there is a financial claim on your house or property because of money that you owe to a claimant such as a bank or the IRS. Having a lien on your house can have some very negative effects on your personal credit and it can make it very hard to sell a house with a lien.
There are different kinds of liens. A mortgage lien is one of the more common ones. If you’ve taken out a mortgage loan through a bank or lender and then defaulted on the loan by missing payments, then they might put a mortgage lien on the house, making them the lien holder. If you took out a second mortgage or a home equity loan, that secondary lender is the lien holder. These liens will remain in effect until the financial requirements of the mortgage are in good standing or the mortgage is paid off.
There are many other reasons that a lien could be assessed against your property as well. If you fail to pay property taxes in a timely manner, a lien can be assessed by the local government. If you fail to pay utility bills, the utility company could assess a lien on the property to recoup those costs. If you owe contractors, electricians, or plumbers a large amount of money for work done on the home, they might be able to put a lien on your home until you pay what’s owed. The IRS or federal government could also issue a lien against your property over unpaid federal taxes. Other reasons for a lien could be because of unpaid child support, court decisions, and other debts.
***Always consult legal counsel before making a decision***
What Kinds of Liens Are There?
Your mortgage agreement may include a lien when you buy a piece of property, such as your home. Alternatively, liens can occur when someone takes legal action against you to collect outstanding debts. In either case, these documents grant individuals or organizations the right to claim ownership over an asset of yours.
Depending on the situation, you may encounter a range of liens, including:
Home Loan
When you secure a home loan, your home acts as security against the arrangement. As part of this agreement, most lenders can foreclose on your property if you miss regular payments or other conditions, such as insurance coverage and residency requirements.
Materialman Lien:
A material man Lien is a legal action that can be claimed against your property by contractors and subcontractors who have not been paid for their work on your house. While it may seem inconvenient to pay off the lien, you could also negotiate its payment into the sale price if you decide to put your house on the market. Thus, taking care of this issue now will save you from more trouble down the road.
Judgment Liens
If a creditor or organization succeeds in their lawsuit against you, they may try to collect the financial compensation due directly from you. But if that doesn’t work out for them, they can secure payment by filing a lien on any asset of yours. Either way, these entities will get their payment through collection or liens.
HOA Lien
The homeowners’ association has the right to place a lien against your property if you fail to pay dues or violate any rule that requires financial compensation. Maybe you cut down trees without permission or made significant changes to the structure of your home that could reduce its value in the future – whatever HOA rules you broke can be enough for them to seek legal action against you and file a lien.
Department of Revenue Lien:
A Department of Revenue lien could be enforced against you if you still need to settle your state taxes. However, some options may allow for payments instead of the total amount – like transferring the lien to another property or your assets. Involve an attorney and a certified accountant during this process to ensure everything goes smoothly.
IRS Lien
A federal tax lien from the Internal Revenue Service (IRS) is one of the most complex liens to resolve. You must enlist a team of legal and accounting professionals to help determine how best to pay or settle your debt as soon as possible.
Investigate the Lien
Because there are so many different types of liens, each one comes with its own satisfaction requirements. Sometimes you can settle with the lien holder for a percentage of the owed amount. Other times you can get them to agree to lift the lien while you repay the debt. Other times, however, they will not budge until the loan is repaid or they own the property and can sell it to recoup their money.
If you’re serious about selling the house, you need to be serious about trying to pay off the lien before selling a house with a lien. Any active lien will be present on the title report, which will be a serious red flag to any buyer. Chances are, it’s the kind of thing that will send them running or at least make them question what else is wrong with the transaction.
If you are able to clear the lien, make sure you request a letter in writing that it has been done. This is to protect yourself in case the lien still shows up on the title report after repayment. Also, sometimes contractors will fail to remove liens after receiving payment, either willfully or by accident. You’ll want to be able to show a paper trail proving the lien is no longer valid.
Dispute an Incorrect Lien
Do you feel as though the lien has been incorrectly placed on the property? Consider your options. First, go to the creditor or lender and make your case as to why the lien should be released. Be prepared to prove this through paperwork and financial documentation. If they say no, hire legal representation and file a legal case in court. If you’re able to prove to the court that the lien is unjust, they will have it released. However, if you don’t win the case, you’ll be back where you started needing to settle with the creditor.
Ask for a Lien Release
If you’re unable to get the lien released but you still want to sell a house with a lien on the open market, you’ve still got some options. First of all, you’ll want to identify a real estate expert who understands this kind of situation. If you’re not able to satisfy the lien holder requirements, perhaps they can help you acquire a full or partial lien release.
This doesn’t free you of the lien obligation. Rather, because they like the idea of getting something rather than nothing, the lien holder might consider allowing you to list and sell the home with the understanding that the lender will receive a certain amount from the sale in order to satisfy the debt. Sometimes they’ll want everything they’re owed but sometimes they will accept lesser amounts in order to move the process along. Ultimately, no one enjoys drawing out this process, so if you’re open to getting them their money in any way possible, they’re apt to listen.
If you can do so, pay off your debt in full. But if it’s not possible, there are still two available options. You can negotiate with the lienholder– perhaps they will accept a lower amount or set up installments for repayment.
Alternatively, find someone willing and able to take over ownership of the lien from you; however, this scenario may be unlikely.
Sell Your Home to an Investor
A lot of what we’ve discussed can be very stressful and, perhaps even more important, very costly. If you find yourself with a house lien and you don’t have the money to satisfy it or a solid lead on a buyer who can take the home off your hands, your best bet might be to sell the home to an investor like Nexus Homebuyers who will buy it as-is.
It’s pretty common for homes with liens to be sold this way. Can you sell a house with a lien on it? Yes, you can. Selling a house with a lien may seem complicated, but it’s not impossible. If you’re wondering how to sell a house with a lien, the answer is to find an investor who will buy it from you. An investor gives you a fair cash offer and takes the home off your hands quickly so you can move on and start fresh. You don’t have to worry about the debt hanging over your head any longer. If you’re interested in receiving a cash offer on your home, whether there’s a lien on it or not, click here to get started.
