What Is a Lien? Can You Sell a Property with a Lien on It?
A lien is essentially an unpaid bill that was secured by your property. In simple terms it means “a legal claim or right against a property.”It can be for unpaid taxes (a tax lien), a cash settlement a judge awarded against you or unpaid lawyer bills (a judgment lien), or it can be for unpaid bills relating to a home improvement or renovation projects (a mechanic’s lien). One of the most common reasons for a lien is due to delinquent payments. Liens can be difficult sometimes to clear, but depending on the circumstance of the lien and who’s it is, you can sell a house with a lien on it.
What Types of Liens can be Placed on a House?
> Mortgage Liens- when you take out a mortgage loan to purchase a home, the lender places a lien on the property as collateral for the loan. If you default on your mortgage payments, the lender can foreclose on the property to recover the unpaid debt.
> Judgment Liens- If you are sued and lose the case, the court may place a lien on your home to cover the damages awarded to the plaintiff.
> Mechanic’s Liens- If you hire a contractor to perform work on your home and fail to pay them, they may place a lien on the property to secure payment.
> Property Tax Liens- if you fail to pay your property taxes, the government may place a lien on your home. This lien must be paid before the property can be sold.
It’s important to understand the type of lien that exists on your property so that you can determine the steps you need to take to clear it.
First, Determine If the Lien is Yours
First and foremost, you want to make sure the lien is, in fact, yours. Title officers search for these holds using your name, so sometimes multiple matches will pop up. Family members who share the same or similar names or people who have unusually common names might see liens on their title report that don’t belong to them.
If it’s a case of mistaken identity, work with your real estate agent and title officer to clear it up. Usually, you will just need to provide proof of your birthdate and address.
What to Do if the Lien is Not Yours?
If the lien isn’t yours and it’s not a case of mistaken identity, it might belong to the previous owner of the house. If this is the case, the title officer will contact the previous owner to see if they have a copy of the release of lien to record. If they don’t, either the old owner or title officer will contact the entity who issued the lien and ask them to release it.
If that doesn’t work, you can always instigate legal action, but this is costly in terms of time and money, and it may prevent you from selling your property. Unfortunately, in this case, it may be in your best interest to pay the lien out of your sale proceeds and move on.
To prevent delays in closing, search for liens on your property before getting to the offer stage. A title officer can do this for you, or you can do it yourself online, using your county recorder, assessor, or clerk’s website. All you need is the property owner’s name and address.
Can you sell a house if the if the Lien is Yours
If the lien does belong to you and is correct, you must contact the entity that issued it and ask how best to resolve the issue. Agreeing to pay for the lien out of sale proceeds is usually the cleanest and easiest way to do this.
If the lien belongs to you but represents a bill that was already paid, you have two options:
- You can contact the entity that issued the lien and ask for them to release it.
- You can present the title officer with proof in the form of receipts that the debt was paid.
To ensure settled mechanic’s liens don’t hold up the sale of your home, ask vendors for a release as soon as you make the final payment. The release is like a receipt but more official and it will resolve title issues in the case you want to close before the liens have cleared the system.
If you have the financial resources to do so, the easiest way to sell a home with a lien on it that is yours is to simply pay off the lien. This will clear the title and allow you to sell the property without any encumbrances.
Please be aware that a buyer may expect specific concessions before they sign on your home and take over the title with the lien. Sometimes the best option is to consider selling your house “as-is”. Selling as-is would then allow you to pay off your debts a little with the sale and would eliminate extra fees such as repairs or inspections before you sell your house.
If you’re feeling overwhelmed by the process of selling a home with a lien on it, remember that you have options. With some careful planning and the help of a trusted professional, you can successfully sell your home and move on to your next adventure.
How to Remove a Lien?
First and simply, you can pay the debt. If you do not have the resources or funds to pay the debt in full, you do have some other options. For example, you can contest the lien in court to prove or “perfect” the lien. You may also consider creating a deal such as a payment plan with the lien holder to settle the debt.
If you have any questions about a lien on your property, it’s always best to consult an attorney. They will guide you through the best course of action and make sure you are legally protected.
How Long Does a Lien Last?
The length of a lien depends on the type of lien. One thing to be wary of is that foreclosure does not always close a lien. The buyer can become responsible for the lien and remain on the property title if the proper paperwork and release of lien is filed.
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