Selling a House with a Lien: A Guide for Homeowners

Selling a house is already a complex process, but when there’s an unrecorded lien involved, it can become even more challenging. If you’re a homeowner in this situation, you might be unsure of how to navigate the process or even whether selling is possible at all. Here we address these concerns and provide you with the knowledge necessary to make informed decisions about selling your house with a lien and how your title company can work with a lien search company.

Can You Sell Your House if it Has a Lien?

The short answer is yes, you can sell a house with an unrecorded lien on it. However, it’s essential to understand that the lien must be addressed and resolved before the sale can be finalized. A lien is a legal claim against your property that affects the clear transfer of ownership, and it’s the seller’s responsibility to clear the title before the sale. In many cases, this means paying off the lien or negotiating a settlement with the lienholder.

How to Clear a Title

Determine the amount and type of lien: First, gather information about the lien, including the amount owed and the type of lien. This information is essential for determining your options and negotiating with lienholders.

Negotiate with the lienholder: If possible, work with the lienholder to negotiate a settlement. This might include a reduced payoff amount, a payment plan, or other agreed-upon terms.

Pay off the lien: If negotiation isn’t an option or the terms are unfavorable, you might need to pay off the lien in full. In some cases, you can use the proceeds from the sale of your home to cover the lien amount, provided the buyer is aware of the situation.

Obtain a lien release: Once the lien is satisfied, the lienholder should provide you with a lien release, which will clear your title. Ensure that the release is recorded with your local county recorder’s office to officially remove the lien from your property’s records.

The Different Types of Liens

Mortgage: A mortgage is a lien against your property that secures a loan from a financial institution. When you sell your home, the mortgage lien is typically paid off using the sale proceeds.

Primary: A primary lien is a lien that takes precedence over other liens on the property. In most cases, this refers to a mortgage lien.

Secondary: Secondary liens are those that come after the primary lien. Examples include home equity loans or lines of credit.

Tax: Tax liens arise when a homeowner fails to pay property taxes. These liens must be paid off before a house can be sold.

Judgment: A judgment lien is the result of a court ruling against a homeowner. This type of lien might result from unpaid debts, damages, or other legal disputes.

Mechanics: Mechanics liens are placed on a property by contractors or suppliers who have not been paid for work completed on the home.

HOA: Homeowners Association (HOA) liens can be placed on a property when a homeowner fails to pay their HOA dues or assessments.

Alimony or Child Support: In some cases, a lien may be placed on a property to secure unpaid alimony or child support payments.

Unrecorded Lien:  An unrecorded lien is an issue that affects the subject property but has not been formally recorded in the county records.  These liens will NOT show up on the title search completed by the title company which is why it is important to utilize Real Res to complete a Municipal Lien Search.

Steps for Selling Your House if it Has a Lien

Pay the Lien

The most straightforward method to clear a lien is to pay it off in full. Depending on your financial situation, you might need to use savings, secure a personal loan, or refinance your mortgage to cover the lien amount. Once the lien is paid, ensure that the lienholder provides you with a lien release, and have it recorded at your local county recorder’s office.

Negotiate Your Debt

If paying the lien in full isn’t an option, consider negotiating with the lienholder. In some cases, they may be willing to accept a reduced amount, set up a payment plan, or agree to other terms that work for both parties.

Dispute It

If you believe the lien was placed on your property in error, you have the right to dispute it. Gather documentation to support your case and consult with an attorney to help you navigate the dispute process.

Request a Payoff Letter From the Creditor

Once you’ve reached an agreement or paid off the lien, request a payoff letter from the creditor. This document verifies that the debt has been satisfied and is essential for clearing your title.

Pay the Lien With the Proceeds From the Sale

In some situations, you can use the proceeds from the sale of your home to pay off the lien. This option requires transparency with potential buyers and their agreement to proceed under these circumstances.

Get a Lien Release

After satisfying the lien, obtain a lien release from the lienholder. This document proves that the lien has been paid or settled, allowing you to clear your title. Ensure that the lien release is recorded at the county recorder’s office to officially remove it from your property records.

How to Avoid Closing Issues

Pay All Bills on Time

To prevent liens from being placed on your property, stay current with all your financial obligations, including taxes, utility bills, and loan payments.

Tell Your Realtor if the Property has a Lien

Be transparent with your real estate agent about any liens on your property. This information helps them navigate the selling process and ensures that potential buyers are aware of the situation.

Perform a Title Search & Municipal Lien Search

Before listing your property for sale, conduct a title search to uncover any unknown liens or other issues. Addressing these problems early can prevent delays and complications during the closing process.

Register With REAL RES, the Leading Lien Search Company in Florida Before Selling Your Home

If you’re selling your home in Florida, make sure your real estate agent uses REAL RES, a leading lien search company in the state. REAL RES can help identify any existing liens on your property, providing valuable information for resolving these issues and ensuring a smooth closing process. Have your agent contact us to conduct a lien search on your property before selling.