Selling your house can feel very complicated, especially when you begin to discover all of the hoops you have to jump through to complete the process. Not only do you have to go through the process of physically preparing your property to sell, you also have to ensure that all of your paperwork is in order.
One of the most common problems that can come up when preparing your home to sell is discovering that you have a lien on the property. And this raises the question: can a house be sold with a lien on it?
But First, What is Lien?
Before we answer this question, it is important to define what a lien is. A lien is a form of security interest. If a home has a lien on it, that typically means that you have fallen into enough debt that a creditor has decided they need some form of security to ensure you pay back that debt. Typically your largest asset is going to be your home, so the creditor will file a lien against your house.
What Types of Liens are There?
There are several types of liens, and they are not all created equal. First, a mortgage is the most common type of lien. There are also other types of liens, including tax liens or judgement liens. Tax liens are filed by the government due to not paying federal, state, or county taxes. These types of liens take number one priority over any other type your property may have filed against it. Any other governmental claims take priority next, and then mortgages.
If you’ve taken out more than one mortgage on your home, the priority goes in order of filing. This means if you have two mortgages from different banks, one from 2014 and one from 2016, the mortgage from 2014 takes priority.
Can A House Be Sold With a Lien On It?
In order to sell your home, you must have a clean title. And a lien means that the title is not clean. But a lien is not the end of the world. There are ways to make arrangements to remove the lien and complete a sale of your home. The downside is that this process usually complicates the sale and may require time and patience.
First, it is important to contact any and all lien holders to ensure you know the total amounts owed. From there, you can make arrangements to pay off the debt. You can either choose to do this before you sell through your own finances, or it may mean that the proceeds from the sale go towards covering the amount of the lien(s). If the total amount is not covered by the sale of the house, then you must present the remaining amount owed upon closing.
Depending on the type of lien and the lien holder, you may be able to negotiate a lower payoff before putting your house up for sale.
While a lien complicates the process, it does not mean you are never able to sell your home. In fact, selling may be your best move in order to remove your debt, especially given the sellers market.
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