Can I buy or sell a home with a lien on it?

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What does it actually mean when there’s a lien on a home?

A lien is a natural result of taking out a mortgage, but it can also mean there are more complicated financial issues with the property. In this article, we’ll untangle the different types of liens and how to buy or sell a house with a lien on it.

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What to know about a property lien

  • A lien is a creditor’s legal claim to property, real or personal…but there’s more to it
  • There are different types of liens for different situations
  • If there’s a lien against your house, it’s not necessarily a bad thing
  • The owner is responsible for clearing the lien

What is a lien?

A lien is a legal claim that a lender or service provider has on an asset that you borrowed money to purchase. Lenders can place liens on property, vehicles, boats, RVs, equipment, or other personal property.

Lenders and service providers can use liens to reclaim money a lender or customer owes them. These providers can stake a legal claim to your property to sell it if you can’t pay them back.

Voluntary vs. involuntary liens

Things like a mortgage or car loan are a voluntary lien buyers agree to.

An involuntary lien is a lien placed on property, real or personal, to recoup costs for property or a service already provided. For instance, if a contractor performs renovations on a home and isn’t paid, they may be able to place a lien on the property.

What are the different types of liens?

Property tax lien

State and federal agencies can place a lien against a property if the owner doesn’t pay property taxes.

Property lien

A property lien is a legal claim to a property if the borrower doesn’t pay their financing debt. Mortgages and vehicle loans are voluntary property liens. Judgement and mechanic’s liens are examples of a property lien since both use your property as collateral.

Mechanic’s lien

A contractor or subcontractor can place a lien on a property if they provided a service or performed repairs and didn’t get paid. This is also sometimes known as a construction lien and the laws governing them depend on the state.

Tax lien

The federal government places a tax lien on a property when the owner fails to pay taxes. You can release a tax lien on your property by paying off the taxes or reaching a settlement with the IRS.  The government can put the property up for sheriff’s sale and use the proceeds to pay the debt if you can’t pay the taxes.

General judgment lien

Sometimes a property owner owes debt on something completely unrelated to their home, but if they can’t pay that debt a judge can give the property over to their creditors to recoup their costs.

Judgment liens apply to real and personal property and can even be attached to future acquisitions if the debtor doesn’t have any property for collateral.

Child support lien

You could have a lien against your property if you fail to pay child support.

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The house may seem perfect but you may be agreeing to take on some serious debt if you don’t do a title search and make sure there are no liens on it before you close

How can I find out if there are liens on a property?

A title search determines if there are any liens on a property. You can do this for free on the county recorder’s office, as long as they have the papers on file. You can also hire a title company to do it for you. Doing your own title search can be free, but it can also be time consuming.

How do I clear a lien on a property?

Clear a lien on a property by paying off the debt. You can take legal action to remove the lien without paying if you believe the lien was placed in error. For example, if a contractor did an unsatisfactory or incomplete job and you refused to pay you could argue the lien was illegal. If they file a lien on the home to get their payment, you can hire an attorney and fight the lien.

If you are selling a house, you can work to clear any liens by paying your debts or taking legal action if you feel you don’t owe the money. You can still make an offer on a home with a lien on it but work with your real estate agent and a real estate attorney to make sure the debts are cleared so you don’t buy a home someone else has claim to.

What does a lien mean when you buy or sell a house?

If the house has a mortgage then it has a lien against it, but it is a voluntary lien paid off upon the sale of the house.

If the lien is involuntary, then it will be visible on the title, and will need to be cleared before you can sell. In a less likely scenario, the potential buyer could offer to pay the debt and clear the liens, making the home available for them to purchase, especially if the market is tight.

Liens on a home can complicate the closing process, so the earlier you know about them, the better.

You can buy or sell a house with a lien on it…but it may get complicated

A lien on a home isn’t necessarily a bad thing if that lien is a mortgage. But, if the lien is involuntary and the result of unpaid debts, it can complicate the sales process and delay closing. Conducting a title search on a property regardless of whether you want to buy or sell it can help you understand what you’re getting into and give you a chance to clear the liens.

Stephanie Mickelson is a freelance writer based in Northwest Wisconsin who specializes in real estate, building materials, and design. When she’s not writing, she can be found juggling kids and coffee.

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