Can I Sell a House With a Lien on It? If So, How?

Are you expecting to receive an inheritance? If so, chances are, you’ll inherit a house. After all, leaving a home or a property to heirs is what nearly seven in ten U.S. homeowners plan to do.

If that’s the case, and you don’t plan to move into the house, you can sell it instead.

Now, let’s say you’ve already received the property only to discover it has a legal claim on it. If so, the question, “Can I sell a house with a lien on it?” is likely running through your mind.

Fortunately, you’ve come to the right page. Here, we’ll discuss what you need to know about selling a house with a lien, so please read on. 

Can I Sell a House With a Lien on It?

The short answer is yes, you can sell a house even if there’s a lien on it.

However, even if possible, it would be more challenging than selling a house without a lien. One reason is that a lien attaches to the property and not the owner. This means that a legal claim on a property can get transferred to the next owner.

So, if you sell a house with a lien still on it, the buyer takes over both the property and the lien. Few people would be willing to do that, which is why most buyers avoid properties with liens.

Also, note that the type of lien can influence how complex the process can be. For example, a property with a voluntary lien is often easier to sell than one with an involuntary lien. 

What Is a Voluntary Lien?

A voluntary lien on a house is one that the homeowner actively signs up for. These include mortgage loans and home equity loans. The homeowner took on these debts, knowing the lender would place a legal claim on their house.

It’s easier to sell a house with a voluntary lien than an involuntary one, as the proceeds can pay it off.

Suppose you sell your inherited house with an active mortgage. In this case, part of the money you get from the sale goes toward paying off the remaining mortgage debt. So, it automatically provides a lien resolution, clearing off the legal claim.

You can then collect the remaining profits from the sale for yourself. 

What About an Involuntary Lien?

An involuntary lien is a legal claim on a property that an owner has not consented to. Regulatory authorities usually do this to homeowners with unpaid debt obligations. Likewise, collection agencies may do the same.

Selling a house with an involuntary lien is more challenging since owners aren’t always aware of the claim. Sometimes, they only learn of it because potential buyers found it first with a lien search.

Unfortunately, at that point, most buyers would’ve already walked away. After all, if they went through with the purchase, they would inherit the debt. They would also have to deal with the claimants (the ones who filed the lien) themselves.

That said, here are some examples of typical involuntary liens.

Property Tax Lien

A property tax lien is an involuntary lien that the Internal Revenue Service (IRS) may file. The IRS may do this if the homeowner has unpaid income or property taxes. This is quite common; in 2021 alone, the IRS said U.S. taxpayers failed to pay $688 billion in taxes.

Judgment Lien

A judgment lien is a legal claim that a court of law can place on a property. This can happen if a homeowner owes another party money they failed to pay on time. For instance, if the homeowner fails to pay child support or alimony.

Mechanic’s Lien

A mechanic’s lien is also involuntary; it can come from a contractor who did a job the homeowner refused to pay. For example, the homeowner hired a plumber to repipe their house but didn’t pay in full. This can force the service provider to file a lien on the property so they can get paid.

This type of lien can also come from a collection agency for unpaid surprise medical bills. Such expenses are prevalent, with four in ten Americans having faced them at least once. In this case, a doctor may hire a collection agency to put the lien on a non-paying patient’s house. 

Unsure if Your House Has a Lien?

If you’re unsure if the house you want to sell has a lien, you can find out by running a lien search.

In most states, including Tennessee, you can do a lien search using the property’s address. If the house you wish to sell is in Memphis, you can use Shelby County’s online property search tool. Simply fill out the form, tick all the checkboxes for liens, and hit the search button.

You can also call one of the Shelby County’s Register of Deeds offices. They can help you conduct the lien search.

Alternatively, you can hire a title company to perform the search. However, this can cost you around $100 to $250. Factors influencing the cost include the house’s location, age, and how many owners it has had. 

How Can You Sell a House With a Lien Then?

Your first option is to pay off the lien if you can afford it or if it doesn’t involve a significant amount of money. You can also take on a debt consolidation loan or negotiate with creditors and claimants. Or, you can work with a direct cash buyer willing to buy your house and deal with the lien themselves. 

Paying off the Lien Before Selling

If you can afford to pay the amount owed on the property, consider doing this before selling it.

Clearing a title before putting it up for sale will help you attract more potential buyers. This way, when they perform a lien search on the property, they won’t find any. This may lead to your house selling faster than if it had an outstanding lien.

Taking on a Debt Consolidation Loan

A debt consolidation loan is a financing program that can help pay off multiple debts. In this case, you’d take on a new loan and use the funds to pay off all the liens on the house you wish to sell. Once the title is clear, you can put the property up for sale.

You can then use some of the money from the sale to pay off the lender who issued the debt consolidation loan. In most cases, these loans come with monthly repayments and multiple-year terms. If there’s any left from the proceeds, which there likely would be, you can keep the rest for yourself. 

Negotiating With Creditors and Claimants

You may want to do this if there are multiple liens on the house you wish to sell and you can’t pay them all out of pocket. In this case, consider negotiating a payment plan with the creditors and claimants. They may agree to remove the lien they placed on the property if you assure them you’ll pay off the debt.

You may still have to pay administrative fees to remove the liens from the property, though. Get in touch with your county recorder to learn how to file a release of lien and how much it costs.

Once you finish that step and are sure there’s no more lien on the property, you can start looking for home buyers. Then, once you’ve sold the house, you can use the proceeds to pay off the creditors and claimants. 

Working With a Direct Cash Buyer

Direct home cash buyers are often businesses that buy properties directly from owners. They’re real estate property investors that can close in as little as seven days or a few weeks.

You can sell a house for cash to one of these buyers, even one with an active lien. In this case, the buyer would not only pay you for the property but also take over the active lien. In short, they’ll assume responsibility for the legal claim and pay it themselves.

Since the buyer will handle the lien, you can expect them to deduct its cost from the house’s purchase price. However, they should still give you a fair cash offer on the property. If their bid seems too low, it likely is, so feel free to take your business elsewhere.

Another perk of partnering with a direct cash buyer is that you can sell the house to them in an “as is” condition. Doing so frees you of the need to conduct property repairs, upgrades, updates, or staging. This can be an ideal option if you simply want to rid yourself of the property with a lien on it. 

Ready to Sell a House With Lien on It?

Now that we’ve answered your question, “Can I sell a house with a lien on it,” the next step is to decide which route to take.

If you want it done and over with as quickly as possible, then our team here at We Buy Houses Memphis can help.

So, give us a ring or fill out our online contact form today. You can rely on us to provide a fair cash offer for your house within 24 hours.