Can a House Be Sold With a Lien on It?

Fannie mae, real estate investor, prove financial hardship, unsecured debt
  • By My Tennessee Home Solution
  • 28 Feb, 2024

Selling your house is a difficult decision with many variables to consider or navigate. If the property has a lien, you’ll feel more confused about your options. So, can a house be sold with a lien on it?

The team at My Tennessee Home Solution, the leading Tennessee home buyers, will cover all you need to know in this post.

What Is a Lien?

A lien on your house means a creditor has a legal interest in your home. Essentially, you’re in debt to a person or an entity, and they are holding your house as collateral until you clear your debt.

When a potential buyer runs a title search on your property, they’ll see the lien and may decide against purchasing.

If you have a lien on your property, you’ll receive the notification by mail. You can also confirm the lien by checking with your county clerk.

The Common Types of Property Liens

There are various types of property liens. However, they generally fall into two main categories:

Voluntary Lien

This is the type of lien you’ll get on your property when you agree to use it as collateral for a loan. A mortgage lien is the main example of a voluntary lien. The lender can foreclose on the property if you don’t keep up with your payments.

Involuntary Lien

These are liens on your property you didn’t sign up for. However, you’re on the hook for owing a debt. You may have an involuntary lien on your property if:

  • You lost a legal judgment
  • You have unpaid income or property taxes

So common examples of involuntary liens include:

  • Tax lien
  • Judgment lien
  • Child support and alimony liens
  • HOA lien
  • Mechanics lien

Selling a House with a Lien On It

Can a house be sold with a lien on it? The short answer is yes. However, you can’t list your house and sell it like any other property. The lack of a clear title makes the sale process more complicated.

The lienholder has a legal claim on part of the value of your home. Therefore, you can’t proceed with selling your home until you’ve come to an agreement with them.

What Are the Options for Selling a House with a Lien On It?

Your options for selling a house with a lien include the following:

Pay Off the Lien First

The first and obvious option is to pay off the lien. However, it depends on how much debt you’re looking at and if you have the funds to take care of it. It’s also possible to dispute debt and either lower the amount you owe or secure the lien release without paying anything.

Either way, you’ll need to get the payoff letter to prove that you no longer have a lien on the house. After paying off the lien, you can proceed with selling the house.

Pay the Lien with Proceeds From Selling the House

Some creditors may agree to provide the payoff letter before you sell the house to allow you to work the debt into the sale proceeds. In this case, you’ll need to work with an escrow agent on the sale.

Sell with the Lien

If you can’t pay off the lien and your attempt to negotiate debt doesn’t work, you can still sell the property to a buyer willing to assume the lien. However, this approach will likely elongate the sale process, and it may not be the best option if it’s already time to move.

Few buyers will welcome the extra complication. The few that do may struggle to find a lender, so there’s a high chance of the sale falling through midway.

Sell the House to a Cash Buyer

Home cash buyers understand the complications of buying a property with a lien. They will have no issues taking the property off your hands, irrespective of the lien type. However, you may need to work out the terms of sale with the lienholder.

Sell Your House with a Lien to a Reputable Cash Home Buyer

Can a house be sold with a lien on it? Yes. However, the complicated nature of the sale process can be frustrating. When you decide to sell the home to a cash buyer, you can move forward and extricate yourself from the burden of holding the property quickly.

Are you ready to sell your house? We are the team to trust whether you’re selling a house after buying it or selling a property you’ve owned for a long time.

 Call My Tennessee Home Solution today at (615) 933-5431 to request an offer.