Can You Sell a House with a Lien on It? (and How To Do It)

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?

What Is a Lien? (and How To Check if You Have a Lien on Your Property)

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.

Is Selling a House with a Lien Possible?

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:

• Clearing the lien from the proceeds of the sale
• Clearing the lien up front, before the sale

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.

Types of Liens You Can Have on Your Home

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.

Voluntary Liens

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.

Involuntary Liens

So, involuntary liens are placed on your property because of outstanding debts. The most common are:

• Judgment lien – when someone files a lawsuit against you, like a lawsuit for injuries or damages, wins that lawsuit, and you can’t pay the court-ordered amount, they can place a lien on your house for the amount they won. You can typically sell a property with a judgment lien on it, but you need approval from a judge.
• Child support/alimony lien – if you are unable to make your child support or alimony payments, a court can place a lien against your home. Like with judgment liens, you would need court approval before you can sell your house.
• Mechanics lien – mechanics liens are liens placed by contractors, builders, other traders, or suppliers for the work they’ve done or the supplies they sold if you aren’t able to pay them.
• Tax lien – the government can place a tax lien on your property for taxes you haven’t paid. Tax liens can be both for unpaid income or property taxes. A tax lien generally has priority over all other liens. This is one of the reasons lenders often include property taxes into monthly mortgage installments – unpaid property taxes could lead to the lender losing money in case of foreclosure if the money from the sale is not enough to cover both the outstanding taxes and the mortgage.

What Is the Priority of Liens?

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:

1. Tax lien
2. Mortgage lien
3. Judgment lien (recorded in 2021)
4. Mechanics lien (recorded in 2022)
5. Alimony lien (recorded in 2023)

How To Get a Lien Off Your House

As far as clearing liens goes, there are several options:

• Paying off your debt upfront – the first and most obvious solution is to pay off all of your debts. This will remove any liens on your property.
• Dispute the lien – in some cases, an attorney may help you dispute the amount of the lien or even remove it completely. It is not uncommon for people to repay their debt but that the lien-holder does not request for the lien to be removed so it still shows up on the records. In this case, hiring an attorney could help you out.
• Pay the debt from the proceeds of the sale – one of the first questions asked in this article was – can you sell a house with a lien on it? Again, the answer is yes, but then the amount owed would need to be worked into the closing costs. So you would pay off your debt from the proceeds of the sale.
• Selling a house with a lien for cash – in some parts of the US, you can sell your house for cash even if it has a lien on it. However, this does not remove the lien attached to the property and the buyer would need to pay off the lien.

Important: Clearing a Lien Does Not Clear Debt

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.

Sell Your House and Pay Off Your Debts

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.

Author:

Cesar Gomez , Broker /

Cesar has worked as a real estate agent and broker in the southern California region since 2013.

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