Selling A House With A Lien
Selling a house is hard enough as-is, and a lien can often complicate things further. When selling a house with a lien, you’ll probably have a lot of questions. Let’s take a look at what liens are, the purpose they serve, and most importantly; how you can sell a house that has one.
First Thing’s First: What is a Lien?
A lien is a public record filed in your county (if you live in North America) for a property. The liens tell creditors what they are owed. A lender can seize the property with the lien on it if the debt is not paid.
Why are Liens Useful?
The payment is the paper trail creditors use to get you to repay your debt. Once a lender gives you a loan to pay for your property, the lender gives the country clerk a lien against your property.
Should you not pay your lien, the lender can take your house. However, liens go beyond just the loans you took out to pay for your house. If you don’t pay your property tax, a second lien could be filed on your property.
Types of liens include:
this is interest in real property that doesn’t involve possession that a lender holds, but the property contains the mortgage encumbrance for the loan’s lifetime. Second mortgages, or home equity loans, the lender is still the secondary lien holder. The legal claims to your property are still in effect until you pay off your loan or mortgage.
If you don’t pay your property taxes, an individual is liable to have a lien put against them. This also goes if you don’t pay your utility bills or owe professional workers like electricians, carpenters or contractors’ money for working on your home. Some people can be unaware a lien has been put on them.
How to Know If You Have a Lien on Your Property
Because liens are public record, you can easily find out if there’s a lien on your house (or someone else’s house, even).
Search the address with the county recorder, county clerk, or the assessor’s office. It’s free to search for a lien, but you might have to pay for a copy of a report or shipping, should you need it.
If you want to save time, you can hire a title company to do the work for you. However, they’ll most likely charge a fee. It would be worth it, though, because you don’t want any last-minute hassle when it comes to selling your house from a surprise lien.
How to Sell a House with a Lien
So, you found a lien on your house. Now what?
You can still sell your house with a lien on it, but the lien adds a few more steps to the house selling process.
Examine the liens
What kind of liens do you have? What are the judgments against your house? Check if it’s impossible to negotiate your liens, or to settle the liens with some money. There might be an easy way to get rid of your liens.
Sell Your House “As Is”
This would mean putting your house up for sale and having the buyer incorporate the lien into their purchase. However, it may be difficult to find a buyer willing to purchase a house with a lien against it, as many buyers see judgments as a problem needing to be paid in full. Hopefully, you can find someone empathetic to your need to sell your property as it is, and perhaps help them secure lien releases and negotiate reduced settlements.
Use Profits from the Sale to Pay the Lien
Let’s say you’re selling your house for $200,000, but the mortgage is $180,000, and the lien is worth $10,000. With the $20,000 profit, you could pay off the cost of your lien and have $10,000 leftover. While liens detract from the overall profitability of the sale, you won’t have to pay the value of the lien upfront and can wash your hands of the debt.
Remove the Lien
Contact the lien holder for the payoff figure, including the total debt owed, interest, and further charges. Of course, the best and easiest way to remove a lien is to pay it off. However, that’s only half the process. The lien holder must then confirm the payment and cancel the lien, which could take a few months. Depending on how quickly the lien holder responds and the business of the county clerk’s office. If you want to avoid complications with paying off the debt, contact the lien holder, request endorsement of the lien for cancellation and give it directly to you. Be sure to copy the document of all documents and give the clerk the original for cancellation.
Negotiate with Lenders and Lien Holders
A creditor’s judgment is rarely set in stone. Find an expert who can contact a lien holder and negotiate a partial or full release of the lien. Intelligent lien-holders would always want something over nothing, but you need to know your rights, so you don’t give creditors more information than they need.
Find Another Way to Pay Your Lien
A skilled lien expert could talk to creditors about reducing or voiding the debt of the lien. Try not to tell the lien holder that you need the release to sell the house, as that puts the lien holder in a dominant position. However, you would want them to know because they’ll wait for settlement payment and know it came from proceeds from the closing. Professionals can help you negotiate this sticky situation.
Wait for the Lien to Expire
That’s right; sometimes a lien expires. Many homeowners wait until a lien expires instead of paying it off since it makes financial sense. For example, a Federal Tax Lien expires after ten years. Once it ends, a homeowner qualifies for a Certificate of Release to void the lien. A judgment lien is valid before the original judgment expires, but a creditor can renew judgments before they expire. If you have a sharp creditor or plan on moving within a decade, waiting for a lien to expire isn’t always the smartest idea.
Selling a house with a lien can seem a daunting task, but that doesn’t mean it’s impossible. By taking the proper precautions and doing your homework, you’ll find the process to be much less of a headache than you originally expected.
Feel free to get in touch with us at (713) 357-1625 to discuss your options. We are experienced house buyers in and around Houston and have years of experience dealing with liens.