Dealing with Liens on Your Home: What You Need to Know Before Selling

A lien might not be a familiar term for many, but it’s a crucial concept for homebuyers, homeowners, and sellers. A lien is essentially a legal claim on your property due to an unpaid debt. For example, if you fail to pay your real estate taxes, the government can place a lien on your home. Similarly, a contractor could file a mechanic’s lien if they haven't been paid for work on your property. Here’s a deep dive into what happens when you have a lien on your house and how it affects your ability to sell.

What Is a Lien, and How Is It Found?

Before a home sale can be completed, a title company steps in to verify that the seller has the legal right to sell the property. The title company conducts a search through public records to identify any liens against the property, ensuring that anyone with a financial claim gets paid when the sale closes.

Barbara Carrollo-Loeffler, director of consumer and residential lending at Provident Bank in Jersey City, NJ, notes that “many sellers may already be aware of liens filed on their property, but some may come as a surprise.” For instance, a lien might be newly issued, or it could be an older lien that went unnoticed during a previous title search.

What Happens If There’s a Lien on My House?

When a lien is detected, the title company will notify you of how much is owed and to whom the payment should be made. According to Pete Palermo, president of Legend Title in Denver, 

“The sale cannot go through unless the lien is paid or released.” 

This makes it the seller's responsibility to resolve the lien before the sale can proceed.

Once you’ve settled the debt, you’ll receive a “release of lien,” which allows the title to be cleared, enabling the sale to move forward. You have a few options for clearing a lien:

• Provide Proof of Payment: Show documentation, such as receipts, to prove the debt was already settled.
• Pay the Lien at Closing: Use the proceeds from the home sale to cover the debt.
• Dispute the Lien in Court: This option can be time-consuming and expensive, so weigh it carefully.

What If the Lien Isn’t Correct?

It’s not uncommon for a lien to be placed in error, especially if it’s a leftover from a previous owner that slipped through earlier title checks. In such cases, the title company will reach out to the prior owner or the entity that filed the lien to secure a release.

 “If the owner does not have the release, then they or the title company can contact the entity who placed the lien to get it released,” 

says Todd Huettner, owner of Huettner Capital.

You could also hire a lawyer and contest the lien in court, but this can be a long and costly process, potentially jeopardizing the sale. Often, experts advise that even if you don't owe the debt, it might be quicker and less expensive to settle it or negotiate a resolution. As Huettner advises, 

“Even if you do not owe them, fighting it may cost you more out of pocket or convenience, so you should always consider paying them or even negotiating with them to solve the problem.”

Bottomline

A lien on your property doesn’t have to be a deal-breaker, but it does require careful attention and resolution to keep your sale on track. Whether you’re paying it off, proving it’s already settled, or negotiating a release, knowing your options is key. If you’re looking to sell your home and want to ensure a smooth transaction, let’s connect and explore your options!

Reference: Sager, J. (2024, September 26). What Happens If I Have a Lien on My House?. Realtor.com.