Quick Answer
Yes, a house with a lien can often still be sold. Valid liens that affect the seller's interest are commonly paid from the seller's closing proceeds, with lien releases obtained and recorded as part of the closing process.
Discovering a lien on a property you are trying to sell can be unsettling. The good news is that in many cases, liens are handled through the normal closing process. The key is identifying all liens early and understanding how they will be resolved.
Example
A seller accepts an offer of $600,000. The title search reveals a mortgage payoff of $300,000 and a judgment lien of $15,000 against the seller. At closing, $315,000 goes to pay the mortgage and the judgment, plus related costs. The seller receives the remaining proceeds. Both liens are released. The buyer gets clear title.
What If There Isn't Enough Money?
If the sale proceeds are not enough to pay all liens, there are several potential paths:
- Seller brings funds to closing: The seller can pay the difference from personal funds.
- Negotiate with lienholders: Some creditors may accept less than the full balance to facilitate the sale. See negotiating liens before closing.
- Creditor approval: The lienholder may agree to release the lien for a partial payment or approve a short payoff.
- Other legal resolution: Depending on the situation, bankruptcy, legal proceedings, or other remedies may be available.
- Cannot close: In some cases, if the liens cannot be resolved, the transaction cannot proceed.
WHEN SHOULD I CALL TITLE?
When you know you have liens or suspect you might, call your title company before listing the property. Early disclosure allows the title team to identify what needs to happen and whether the sale can proceed as planned. Contact 1st Option Title early to discuss your situation.
Don't Hide the Lien
A lien will likely be discovered through the title search. Attempting to hide a known lien or proceed without addressing it can create significant problems later. Full disclosure to all parties and your title company is the best approach.
FAQs
Can I sell a house with a tax lien?
Yes, in many cases. The tax lien will typically be paid from the sale proceeds. See what tax liens are and how they work.
Can I sell a house with a mechanics lien?
Yes, but mechanic's liens can be complex. The lien may be disputed, or the contractor may need to be paid. See what mechanic's liens are.
Can I sell a house with a judgment lien?
Yes, if the judgment is against the seller and the sale proceeds can satisfy it. See can a judgment prevent closing.