Today we’re going to talk about liens- what are they, and how do you sell a house with a lien on it.
First… what exactly is a lien?
A lien is a claim against a property made in order to secure payment of money owed. Essentially liens turn property into collateral against debt. There are many different types of liens, so let’s go over those as well. Defining these types of liens will help us really look at how to sell a house with a lien on it.
Types of Liens
These types of liens are probably the first thing that come to mind when considering the types of liens you would find on a house. Mortgage liens are voluntary liens. Most other liens are statutory or involuntary. A lender gets a claim of ownership to help offset the risk of lending large amounts..
Home equity loans
Home equity loans reduce equity by placing a lien on the borrower’s home and can be used as a person’s main mortgage in place of a traditional mortgage. The perks of using a home equity loan is that terms are generally shorter than mortgages.
If you are looking to sell a house with a mortgage or equity lien, paying off the lien is the only way to remove the lien from the property. We will get into how to sell a house with a lien later.
Vendor liens grant sellers the right to repossess a sold property until all unpaid monies are paid off. It is often used with purchase-money mortgages on real estate in which the buyer borrows from the seller instead of or in addition to traditional financing.
There are two types of tax liens: Property Tax liens and IRS tax liens
In the case of property tax liens, these take priority over all types of liens. They are unfortunately common. The government has the ability to sell the property to pay off taxes, but ultimately no one wins in this situation. Mortgage lenders will often make property tax payments in order to maintain first lien status so as not to diminish or eliminate the potential of return.
IRS tax debt will garnish wages first, but if there are insufficient funds they will place a lien on the debtor’s property. The IRS is particularly aggressive at collecting debt and will not hesitate to pursue a forced sale. If you want to sell a house with a lien on it, taxes are a priority issue.
Child Support, Alimony and Judgement Liens
All three of these types of liens come from court decisions. Judgement liens are typically the result of being sued. The lien guarantees that the winning party receives payment regardless of the homeowner’s ability or willingness to pay.
Contractor liens are statutory liens and can be tricky. It is not unusual for a contractor to forget to remove the lien on a property once the work has been completed. You can always looks up your property to verify what liens, if any, are currently on your house. Although contractor and mechanic liens seem common in properties that need a lot of rehab or were foreclosed on, some contractors place liens on all properties being worked on, ensuring payment for finished work.
You can also have a lien on your home if you fail to pay utilities, electricians, lawn maintenance workers… As long as they follow the proper channels and a debt is owed, a lien can be placed.
So… How do I sell a house with a lien on it?
Execute the Lien
The first option is just to execute the lien, or manage the debt. Any liens are going to be listed on the title report which could scare off a buyer.
Ideally you pay the lien off before selling the home. Make sure and request confirmation letters for all liens paid off and the lien holder usually releases the lien easily.
Find a Buyer
It would be much simpler if the liens could just be paid off… easier said than done. If you have been behind on payments in order to receive a lien, than you probably won’t be able to clear all liens easily.
First conduct a title search of the property so you know any and all lien debt owed on the property. You need to prepare a buyer with your detailed, full knowledge of liens. Finding a buyer can be difficult. Liens are a huge obstacle and are often a deal breaker. You might need help finding just the right buyer.
Get the Expert’s Advice!
If you want to sell a house with a lien on it, your best bet is to find an expert to assist. I’m a firm believer in paying others for their expertise to save myself stress and time. Do some research and find a realtor who is experience in securing lien releases. Every lien type requires a different process and getting assistance to guide you through the process is the most efficient way to sell a house with a lien on it.