Common pitfalls homeowners come across when trying to sell their house is having an unknown or known lien attached to it.
People may not realize it but liens are quite reasonable and when dealt with appropriately, aren’t all that devastating.
We will answer the question: can you sell a property with a lien on it.
The good news is, you still can sell your house.
Keep reading to find out more about selling a house with a lien attached to it.
Can You Sell a Property with a Lien on It?
This is a question a seller may worry about once they discover they have a lien on their property. You are still able to sell your house.
We will go over what a property lien is and in what circumstance can you still sell your house.
Do You Have a Property Lien on Your House?
If you are hoping to sell your home, a lien can create a delay. This does not mean that you aren’t able to sell your house.
Depending on large the lien is, and how you handle it once discovered, it may just be a brief hiccup in the entire process.
Don’t lose hope. Let’s look at how property liens can affect home sales and what you have the power to do.
What is a Property Lien?
A property lien is when there is a public record filed against your house or property for debt that is still unpaid. Liens can be submitted by various parties and people for different reasons.
For example, the government can file liens for unpaid taxes.
Contractors could file liens if their renovations weren’t paid for. Ex-spouses can file for missed child support payments, and credit card companies can as well.
Some house buyers might not even know there are liens on their property. This may be discovered during a title search when the deal moves closer to the end.
Homeowners may know there are liens but don’t have the money to cover it.
Either way, liens have to be settled before the sale of a home can occur.
Will Liens Stop a Sale from Going Through?
It all depends on the situation. In most cases, liens cause delays. The sale will still be able to happen, but the lien is going to be withdrawn from whatever profit the seller gains.
For example, if you are selling your house for $200,000 but you still owe $100,000 on your mortgage, you will be left with $100,000 in profit at the closing table.
However, if a lien of $20,000 is found on the property, that will have to be paid off first. Your profit will then go down to $80,000 minus whatever closing costs you may have.
Make sure that you either have the money to cover it with the money you make in the sale or try and resolve the debt beforehand.
If you can, ask a family member if you borrow the amount of money to pay the lien off.
Not Enough Equity
Further issues can arise if you do not have enough equity in your property or home to cover the liens.
If you have enough equity, then there shouldn’t be a problem. If you have low equity, the profits from the sale of your house might not be enough to take care of the lien.
If you were selling your home for $200,000 but still owed $190,000 on your loan, then you would only have $10,000 in home equity.
If a lien is discovered on your property of $15,000, unfortunately, your home sale will not cover this lien. This could put the deal in jeopardy.
However, there are some options, if this is the case.
Pay the debt off first if you can and have the lien removed from your property title.
If you cannot, then there are two other possibilities.
Negotiate with whoever issued the lien. Most will agree to remove the lien if you offer to pay a portion of the amount. You can organize a payment plan where it will be gradually covered. Don’t hesitate to ask!
Negotiate with the interested buyer. See if you could persuade the buyer to take on the lien. Most times, buyers won’t take the lien, however, if they really want the house, they may do this.
Sometimes, liens are transferred. When homes are at auction or purchased through foreclosure with liens attached, these then become the buyer’s responsibility.
They may seem like a bargain upfront; a lien can increase the cost.
If there is a lien attached to a property that you are interested in buying, you can still consider it an option.
Can a Lien Be Discharged?
Sometimes, property liens have a specific time that they last. Once it has expired, if a creditor does not renew the lien, it won’t affect the property. The amount of time varies.
Find out if your lien has expired. If it has, then you no longer have to worry about it.
On a rare occasion, debt forgiveness can occur. Sometimes, a creditor may choose not to collect the debt. This relieves the landowner from having to pay off this loan.
It is essential to receive written confirmation from the creditor if this happens. Ask for them to complete a certificate of confirmation that the lien has been forgiven.
You want evidence of the discharge. Also, make sure you file a copy of this confirmation.
We Will Help You Sell Your House
In this article, we looked at what a lien is and asked the question: can you sell a property with a lien on it. If you have one attached to your property it will cause delays. The good news is yes you still can sell your home.
It all depends on how much you will make in your sale and if you can cover it or not.
Do you live in South Florida? If you are looking for help with selling your house, contact us today! We would love to help.