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Can you sell a house with liens on it? Yes, but there are complications and exceptions, and a lot of red tape to cut through. It depends on the type of lien, the type of buyer, and how much is owed versus your equity in the property. Let’s dive into this deeper.
What Does It Mean to Have a Lien Against Your Property?
A lien is a legal claim an entity places against your property to use it as leverage to satisfy the debts you owe. Liens are placed by different entities for different reasons.
- Tax Liens: Filed by federal, state, county, or city.
- Mortgage Liens: Or property liens, filed by the lender.
- HOA Lien: Filed by the Homeowner’s Association.
Liens are defects on the property title, and traditional buyers typically want a clean title. So you’ll have to take care of your dues before you list the property.
How Do I Resolve a Lien?
There are four options available to you to resolve a lien on your property:
- Pay Off What You Owe: Before you sell your property, pay the lien and clear it from your title.
- Pay It with the Home Sale Proceeds: If you cannot afford to pay the lien out of pocket, you can use the home sale proceeds to cover the difference. At closing, the lien is deducted from your earnings.
- Take Out a Bond: Bonds are expensive, but it’ll cover the cost of the lien so that you can sell the property.
- Dispute the Lien: Sometimes an error has been made by the creditor, and a balance was recorded incorrectly. You’ll need the help of an attorney to argue this, and that’ll cost you, but maybe not as much as what you are being charged by the creditor.
What Happens If I Don’t Pay the Lien?
If you and the creditor cannot agree on a solution, the creditor could seize your property. It depends on the type of lien and the creditor.
Let’s say there’s a tax lien against your property. If you fail to pay, the creditor can issue a tax lien certificate, then sell it at auction to recoup the money. Often it’s an investor who buys the certificate. If you want to recover your property, you’ll pay the investor your outstanding debt plus any interest and fees.
Once you satisfy the debt, the lien is lifted. But if you fail to pay, then the lien certificate holder can enforce the lien and take possession of your property.
Sell Your Property to a Real Estate Investor
It is very hard to sell a house with a lien on it to a traditional buyer. You can, however, sell it to a real estate investor for cash “as-is” – no repairs or renovations, no warranties or inspections necessary.
Investors buy foreclosed and bankrupt properties, or houses with liens on them all the time. Sometimes they will purchase and take responsibility for the lien, depending on the type and how much is owed.
The investor will cover all closing costs and additional sale fees. You choose the closing date, whether it’s in a month, 15 days or less. You can enjoy a quick closing, pay off the lien, and start over with a new house, using any cash left over from the sale.