Can You Sell a House with a Lien on It?
Ten or twenty years ago, you could ask a group of homeowners if they had a lien on their house and most would answer no. Over the last few years, this has changed. With the economy taking a downward turn, a lot of people who never used to be in debt have liens against them.
When people try to remortgage their house or sell it, one of the first questions asked will be if there’s a lien on the property. Having a lien on a property can complicate any real estate transaction.
When you attempt to sell your home, a title search will be performed. This search will show if any liens are on the property. It’s not something that you can hide because it’s a public record.
The good news is, a lien won’t prevent you from selling your house. However, it will make your sale a bit more complicated. The lien will also have to be paid either before the house sells or at closing.
What is a Lien?
When you owe somebody money and don’t pay them, they may file suit against you. If they win, they’ll be issued a judgment. This judgment will be for a certain amount of money.
Once they get their judgment, they can record it. This means they make it a public record. It becomes visible on your credit report. It will also be visible to anyone who performs a title search against your house.
Once someone gets a lien against you, they’ll have a lien against your property. This can extend to bank accounts, wages, and real property.
Can Someone Force a Sale of My House to Satisfy a Lien?
In most states, a lien holder does have the right to force a sale of your home to satisfy the lien. However, this rarely happens. There is usually not enough equity in the home to justify this.
A lien has to be for a certain amount of money before a judge would approve a sale. The only exception to this rule is with taxes, property taxes, and a foreclosure lien. In these cases, the home can indeed be sold to satisfy the debt.
Just because a creditor can force a sale of your home doesn’t mean he will. It can be expensive and very difficult to do this. For the most part, people let their liens sit until you sell their home. They know that, if you do sell, they’ll be paid in full.
How do You Pay Off a Lien?
If someone has a lien against you, you’ll have to pay it at some point. Most liens are good for twenty (20) years. This gives a creditor a lot of time to sit back and wait for the lien to be paid.
If you’re thinking about selling your home, you should contact any lien holders. Offer them a reduced amount to settle the line. Do not mention that you’re selling your home. If they know this, they have absolutely no reason to accept a settlement.
Even if you can save a few hundred dollars, it makes sense to settle. Once all of your liens are settled, you can sell your home free and clear. You’ll also have peace of mind.
What if There Are Liens on the Property at the Time of Sale?
If there are still liens against your home at the time of sale, one of two things will happen:
- You may be required to satisfy the liens prior to settlement in order to offer the buyer a clear and quiet title
- You may be allowed to pay the liens off at closing
If you pay the liens off ahead of the settlement, you should be fine. If you wait to do it at closing, the money will be taken out of the proceeds to your home. Expect to pay the creditors the full amount at closing.
One problem arises if you sell your house and don’t make a profit. If this is the case, you will have an issue. The creditors are not going to clear the liens without being paid. They have no reason to.
You may have to negotiate settlements with the lienholders for less than the amount due. You may have to borrow from friends and family members to pay off the settlements. If you don’t, the sale may not go through.
Overall, having liens on your property is never a good thing. They can haunt you for twenty years! However, if you plan the sale of your home right, you’ll be able to do so without any trouble from the lienholders.
You can sell your house if there are liens against it. Just know that the creditor will have to be paid one way or another!