Let’s get straight to the point - can you sell a house with a lien on it? Typically, yes, but it complicates the process. Selling a house with a lien is contingent on multiple factors, like the type of lien, how many liens you have, the difference between your outstanding debt and the value of your home, the type of sale, your creditors, etc.
That’s precisely what this article is meant to clarify – all the intricacies involved in selling property that has liens attached to it. And so, we should begin from the basics – what is a lien?
A lien is a legal instrument by which creditors acquire the right to claim the property of their debtors to repay any outstanding debts, under specific circumstances. In other words, a lien gives your creditor the right to use your house as collateral if you are unable to meet your obligations towards them.
As far as checking if you have a lien on your house goes, it’s easy. All liens are recorded with your county’s clerk, assessor, or recorder, depending on where you live. You can find a lien by searching your address on their websites or even contacting them directly.
Thus, a lien is a claim on your property by your creditors as long as you have debts. So, can you sell a house with a lien on it? In almost all cases, yes. Selling a house with a lien will make the process a bit more complicated, but it’s within your right. Typically, you have two options:
There are multiple options for how you can clear a lien (besides simply paying your debts) that we will discuss later on in the article. Before we get to that, let’s explain what the most common types of liens are.
There are many types of liens you can have on your home, but they fall into two broad categories: voluntary and involuntary.
Voluntary liens are those where you agree to have a lien recorded against your property, like when you take out a mortgage and the bank uses your house as collateral. Involuntary liens are those where you have unpaid debts and get a lien placed on your property through a court process initiated by your creditor or another plaintiff.
The most common type of voluntary lien is a mortgage lien. As we’ve mentioned above, you take out a mortgage loan and agree for the bank to place a mortgage lien on your home. If you default on your payments, the mortgage lien gives the bank the right to foreclose on your home to pay off your loan.
Just to be clear, your creditor can’t simply foreclose on your home if you missed one mortgage payment, regardless of the mortgage lien. The foreclosure process is highly regulated, varies across the US, and you can often avoid foreclosure. So, a mortgage lien gives your creditor the right to sell your house, but not on a whim.
As far as mortgage liens go, there are two types:
Primary (also called priority lien) – the first mortgage you take out on your house is the primary lien. This is the first debt that will be paid in case your home is sold in case of foreclosure.
Secondary (also called junior lien) – you also have the option to borrow against your home equity and take out a second mortgage. Whether you take the loan from the same lender as for your first mortgage or from a different one, the second mortgage is the secondary lien. It only gets paid once the primary lien is taken care of.
For example, let’s say your outstanding debt for your first mortgage is $300,000 and $20,000 for your second mortgage. The bank forecloses on your house and sells it for $300,000. In that case, the primary lien would be paid in full, while no money would go towards the secondary lien. In case the house sold for more, the rest of the money would go towards paying back the second mortgage.
So, involuntary liens are placed on your property because of outstanding debts. The most common are:
When you are selling a house with liens on it, the debts are paid back in the order that the liens were recorded. This typically means that the mortgage lien takes priority – after all, you can’t use the property as collateral if you don’t own the property.
From there, the liens have priority based on the date of recording with one exception – tax liens have priority over all other liens. So, a common situation when a house has multiple liens on it would be something like this, in order of priority:
As far as clearing liens goes, there are several options:
If your house has liens attached to it and your creditors foreclose on your property and sell it, the liens on the property will be cleared. However, this does not mean that your debt is cleared. The liens will be paid off by priority as we’ve explained above.
You are still liable for any outstanding debt that could not be covered by the proceeds of the sale. The only difference is that the property is no longer collateral.
When you have outstanding debts, you need to make as much as you can from the sale of your home. SleeveUp Homes buys all kinds of underwater properties for cash. We guarantee you can get more than what other investors or wholesalers are offering you.
So, can you sell a house with a lien on it? Yes, to SleeveUp Homes. Request a no-obligation cash offer to see how much you can get. And don’t worry about repairs or closing costs – we will take care of it all.
If you want to sell fast and are worried about how long the traditional process takes, and the commission and fees involved, consider working with SleeveUp Homes.