The word ‘lien’ originates from the Latin word ligare, which means ‘to bond.’ Placing a lien is the means that creditors use to protect their investment when they lend a person or organization money or are owed money for some other reason. Can a house be sold with a lien on it? The short answer is yes.
A mortgage is a type of lien called a voluntary lien. When you get a mortgage, you agree that the home you’re purchasing will act as collateral if you default on the loan.
When someone uses their property or equity in their property as collateral for some purpose, it is called a ‘voluntary lien.’ The most common form of this is when a person uses their property as collateral for a loan. Mortgage loans are the most familiar type of loan.
A voluntary lien is a contract between parties to convey interest or equity in a property loan should the borrower not pay the debt.
Involuntary Liens are the laws that allow creditors to recoup money towed to them. Creditors do not need a person’s permission to attach a lien on a property.
Types of Involuntary Liens
Mechanic liens attach to a property when a contractor claims to get paid for services rendered. Mechanics liens must usually be filed by the contractor within ninety (90) days from the actual completion of work. These liens expire and lose their legal effectiveness. However, they may still be attached to the property because they get filed with the local municipalities when title research returns lien evidence before a potential sale or refinance. The lien appears in the land records. If the lien is no longer valid, your title representative can cancel it.
If you owe money to someone who can prove it in a court of law, they can file a judgment lien against your real estate and personal property.
Multiple liens are not uncommon to attach to a property or a person’s name. If there are numerous liens, there is a hierarchy of liens. Property taxes are at the front of the line. Federal taxes follow property taxes.
Lien priority after the government
Liens generally follow the “first in time, first in right” rule, which says that whichever lien is recorded first in the land records has higher priority than later recorded liens. For example, when you create a mortgage loan, the lender places a lien in the first position. Lien priority means that should a foreclosure happen, lienholders get paid according to their position. Other types of liens include:
- Condo and HOA liens for unpaid assessments
- Family court or child support liens for unpaid alimony or child support liens
- Judgment liens for unpaid court judgments
Resolve a Lien: How to sell a home with a lien on it
Don’t freak out. You first need to research the validity of the lien. Mechanics’ liens often expire and can be removed without payment, provided they are not enforceable. If the debt is still valid, you can get updated payoff information from the creditor. There is a chance to negotiate the payoff amount if you can reach the creditor and make a case for a reduced payoff amount.
Can you sell a property with a lien: Selling a property that has liens attached. Some people have concerns that liens affect the sale of a property. If the sale of a property does not produce enough money to pay the liens, it may not be feasible to complete a deal. The title company will research liens that require payment at the sale. Selling a house with a lien is a straightforward process. If there are enough proceeds from the sale, pay your bill. On the positive side, you will be free of liens and can go forward to your next business endeavor.