What is a lien, and what does it mean to have a house with a property lien?
A lien is a legal claim to a property which can be put on a house by a lender. If a house has a lien on it, this means that the creditor has the right to possession until the debt is cleared. If you’ve taken out a mortgage, for example, and you’ve missed a series of payments, a lender may decide to put a lien on your property in a bid to recover the loan. Liens show up in property searches, and they can contribute to closing delays and complications during the sale process. This is because a property lien makes the title unclear, and you need a clear title to either sell or refinance.
How do property liens affect closing?
A property lien will often delay closing when you’re selling your home. If you think about searches as a report card, a lien will appear as a bad mark or a low grade. If there are liens attached to your property, you’ll need to resolve them before you can sell your home, which can lengthen the process.
Examples of common liens
Property liens are often linked to mortgages and borrowing money to finance the purchase of the property, but there are several other types of lien that may be relevant to you as a homeowner. These include the following:
- Materialman’s lien: a materialman’s lien covers unpaid work on the house. If you’ve had work done on your home, and you haven’t paid the contractor, the simplest way forward is to pay off the debt. Another option is to negotiate payment through the sale of the property.
- Homeowners Association (HOA) lien: Homeowners Associations can put a lien on your house if you’ve failed to comply with regulations or not paid your dues. Like a materialman’s lien, the best course of action is to settle the debt before you try to sell.
- Department of Revenues or IRS liens: a Department of Revenues lien can be put on your property if you haven’t paid state taxes on time. An IRS lien can be issued if you’ve failed to pay federal taxes. These types of liens are very serious, and it’s wise to seek advice from a real estate attorney to try and clear the title.
How to sell a house with a lien: ways to address your lien
Now that you’re aware of the different types of liens, how can you sell your house while it has a lien? The best-case scenario would be to pay off your debts and clear the title before you put your home up for sale. But if that isn’t currently a viable option for you, don’t panic. An alternative that may work for you is asking your real estate agent to write the lien into the settlement agreement so that you can pay off your debts through the proceeds of the sale.
If you can’t afford to clear your debts, you might also be able to take out a bond to cover the cost. This is a slightly more expensive option, but the bond acts as security for the lien and enables you to go ahead and sell your home.
The final option is to dispute the lien with the help of an attorney. In some cases, like when there’s an error on a credit report, title issues relate to payments that have been made but just haven’t been recorded properly. If you believe that you shouldn’t have a lien on your property, an attorney experienced in real estate law can help you clear the title.
A property lien can make it more difficult to sell a house, but it’s not impossible to move forward. Even in complex cases, legal experts can help you settle debts and sell your home.