How do property liens affect home sales?

Can a Property Lien Derail Your Home Sale?

Imagine this: You’ve found a buyer for your home, the paperwork is nearly complete, and you’re ready to move on to your next chapter. Then, a title search reveals a lien against your property—an unpaid debt that now stands between you and the closing table. What happens next? Can you still sell your home?

Property liens can be a serious obstacle in real estate transactions, but they’re not necessarily a dealbreaker. Whether you’re a homeowner trying to sell or a buyer looking to avoid potential headaches, understanding how liens work is essential. Let’s break it all down.

What Is a Property Lien?

A property lien is a legal claim against a home due to an unpaid debt. Liens can be placed on a property by creditors, government agencies, or other parties owed money by the homeowner. Until the debt is resolved, the lien remains attached to the property’s title, meaning the home can’t be sold or refinanced without addressing the issue.

Types of Property Liens

Not all liens are created equal. Here are the most common types:

1. Mortgage Liens – The most common type, this lien is placed by a lender when a homeowner takes out a mortgage. It gives the lender the right to foreclose if the borrower fails to make payments.
2. Tax Liens – If a homeowner fails to pay property taxes or income taxes, the government can place a lien on their home. Tax liens take priority over most other claims.
3. Mechanic’s Liens – Contractors or subcontractors who haven’t been paid for work on a home can file a mechanic’s lien against the property.
4. Judgment Liens – If a homeowner loses a lawsuit and fails to pay the awarded amount, the winning party can place a lien on their property.
5. HOA Liens – Homeowners who fall behind on their homeowners association (HOA) dues may find a lien placed against their home.
6. Child Support Liens – Unpaid child support can also result in a lien against a property, preventing its sale until the debt is paid.

How Do Liens Affect the Sale of a Home?

A lien complicates the sale process because it must be resolved before the property can transfer to a new owner. Here’s how different scenarios might play out:

1. Selling a Home With a Lien

Most buyers won’t be willing to purchase a home with an unresolved lien because it puts their ownership at risk. However, you have a few options:

• Pay Off the Debt – The simplest solution is to settle the debt before closing.
• Negotiate a Settlement – Some creditors may agree to accept a lower payment to release the lien.
• Use Sale Proceeds to Cover the Lien – If your home has enough equity, the lien can be paid off at closing.
• Dispute an Invalid Lien – If you believe a lien was filed incorrectly or fraudulently, you may need to take legal action to remove it.

2. Buying a Home With a Lien

If you’re considering purchasing a home with a lien, be cautious. Here’s what to do:

• Conduct a Title Search – A title company will uncover any liens before you commit.
• Request Lien Clearance – Require the seller to resolve any liens before closing.
• Buy Title Insurance – This protects you against undiscovered liens after the purchase.
• Negotiate a Lower Price – If the seller can’t clear the lien, you might be able to negotiate a discount to cover the cost of resolving it yourself.

How to Find Out If a Property Has a Lien

If you’re unsure whether a home has a lien, here’s how to check:

1. Hire a Title Company – A professional title search will reveal any outstanding liens.
2. Check Public Records – Many counties allow online searches for property liens.
3. Ask the Seller – While not always reliable, sellers are required to disclose known liens.
4. Work With a Real Estate Attorney – If you suspect legal complications, an attorney can help investigate.

Removing a Lien From a Property

If a lien is preventing your home sale, here are the steps to take:

• Pay the Debt – The most straightforward way to remove a lien is by paying off the balance.
• Negotiate With the Creditor – Some creditors will accept partial payment in exchange for releasing the lien.
• File a Lien Release – Once paid, the lienholder must file a lien release with the county recorder’s office.
• Dispute the Lien – If a lien is incorrect or fraudulent, legal action may be required to remove it.
• Use Title Insurance – If a lien surfaces after closing, title insurance can help resolve the issue.

Final Thoughts: Don’t Let a Lien Stall Your Home Sale

Property liens can complicate home sales, but they don’t have to stop them entirely. If you’re selling, make sure to address any liens early in the process. If you’re buying, always do your due diligence to ensure you’re getting a clean title.

Have questions about dealing with a property lien? Contact a real estate professional or title company to guide you through the process and ensure a smooth transaction.

Frequently Asked Questions (FAQs)

1. Can a house be sold with a lien on it? Yes, but the lien must be cleared before ownership can transfer. Most buyers won’t purchase a home with a lien unless it’s addressed before closing.

2. How long does a lien stay on a property? Liens typically remain until the debt is paid or the statute of limitations expires, which varies by state.

3. Can you negotiate a property lien? Yes, many creditors are willing to negotiate a settlement, especially if they believe the homeowner might default entirely.

4. Does a lien affect credit scores? Yes, liens can negatively impact credit scores and make it harder to secure loans or new lines of credit.

5. What happens if a lien isn’t discovered before closing? If a hidden lien surfaces after a home purchase, the new owner may be responsible for it unless they have title insurance.