Can Liens Make it Harder to Sell a Home?

Address Liens Before Selling a HomeWhen selling a home, a homeowner may encounter a home lien. A lien serves as a legal recorded claim which is made against the property in order to collect any money owed. Not every lien makes it hard to sell a home, as most homeowners have a lien from the mortgage lender when they take out a mortgage. In such a case, this lien is only enforced if a homeowner is not able to pay back the mortgage loan. However, there are other liens that can cause potential difficulties for homeowners. Learn more about problematic home liens today.

For informational purposes only. Always consult with an attorney or certified tax expert before proceeding with any real estate transaction.

The Problem with Home Liens

Homeowners can be subjected to liens from mortgage lenders, the federal government or a person with legal interest in the property. Individuals may find out about a lien as it becomes a matter of public record. Homeowners may be forced into foreclosing on a home when not taking action with some home liens, such as mortgage liens, HELOC liens, or tax liens. These liens would need to be paid so that the lien itself can be lifted from the property. Reasons a lien may be placed on a home include:

  • Failure to pay property taxes;
  • Not-payment of taxes;
  • Ignoring bills from a contractor; and
  • Losing a lawsuit.

There are other options when homeowners cannot make full restitution on their debt. Some homeowners may not be able to pay the entire debt outright and choose to settle with their creditor. This can make it feasible to have the lien lifted and make it easier to refinance or sell the property. Some claims may no longer be valid. In such cases, the expired claim may be expunged from the public record by contacting a specific individual. A homeowner may decide not to address their liens and sell the home “as-is.” This may attract a smaller pool of potential buyers and lead to a loss of equity in a home as it may be listed below market value.

Selling a Home with Involuntary Liens

Aside from mortgage notes, the other liens mentioned, such as tax liens and court judgments, are examples of involuntary liens. Homeowners may find it difficult to sell a home with such liens, as many buyers would not want to close on a home with lingering liens. A lien may still exist on a property, even when the payments have been made in full. In such cases, the courts may not have gotten around to releasing the lien or the lien holder may not have given notification. Homeowners would then need to correct the error and request that an old lien be removed from the lien holder. Homeowners who may have had a lien in the past but have paid it off would want to review their title report before listing to ensure that the lien is no longer on the title report.

Having one or more involuntary liens on a home can interfere with the home selling process. According to the IRS, a federal tax lien must be satisfied before a homeowner may sell or refinance. Such a lien may be paid prior to listing or may be paid back from sales proceeds. The amount of equity in a home will be a factor when deciding on whether the tax lien may be satisfied entirely out of sales proceeds. This is a path for those with significant equity in their Las Vegas The Lakes new home. Those that want to maintain their equity and home value may want to pursue paying off any valid involuntary liens. Buyers may see the title report and either look for another home to purchase or attempt to negotiate a lower price.

Selling with Multiple Home Liens

Homeowners may have multiple judgments against them and need to pay off debt to different lenders. Tax liens will take priority over all other liens. This can cause frustration to a mortgage lender. A mortgage holder would be able to recover money owed to them only after federal and state income tax liens have been addressed. A mortgage holder may object to the sale of a property if they are not able to get the amount owed to them from the proceeds. This situation can add a further wrinkle when selling a home with liens. Not only is it harder to close with a qualified buyer, but a mortgage lender may not agree to the sale when the sale price is not sufficient to cover the debt owed to them. Speak with a reputable agent to learn the best approach to selling a home with a tax lien or other judgment.

For informational purposes only. Always consult with a certified tax expert before proceeding with any real estate transaction.

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