Reviewed by: Brandon Brown

There are a lot of potential bumps and potholes on the road to selling your home, and anything that can invalidate your legal claim to your property, such as a lien, is a big one. It’s not a total dealbreaker, but it does mean you have some extra decisions and steps to make.

Liens don’t have to roadblock a home sale—you can navigate around them. Opting for an all-cash buyer, paying off the lien, and getting a court-ordered dismissal are among the possible solutions we explore below.

What Is a House Lien?

Exactly what is a house lien, and how is it significant for you? A legal definition is a “charge imposed upon specific property, by which it is made security for the performance of an act.”¹

In more practical terms: When you borrow money or incur costs—either voluntarily, via taxes, or through other agencies with jurisdiction in your life—it typically creates a debt that follows you wherever you go.

A home lien, on the other hand, is a debt secured by collateral—it’s ultimately connected to your house. While it reflects money that you owe, it targets the value of the property (rather than you as an individual) as the final source of payment. The lender may recoup their money in one of three ways:

• Pay directly – You come through with the full or a negotiated amount of money to clear the debt and terminate the lien.
• Payment at sale – In a property sale, the proceeds first go to the lienholders before you get the remainder.
• Transfer to buyer – The next homeowner is liable for paying off the liens, often either before or at closing, in order to obtain a clear title to the property.

Common Types of Liens

The most common type of these legal entanglements is a voluntary mortgage lien. If you own your home in full and have no equity-based debt, you’re free and clear of any potential liens. Otherwise, one or more lenders will have liens based on a:

• Primary mortgage
• Home equity loan
• Home equity line of credit (HELOC)

Lenders of these products have a lien against your property by virtue of the loan contract you signed with them, which will end once you pay off your mortgage and any other equity debt either over time or in a lump sum using the proceeds of a sale. But when we talk about liens, we’re usually referring to involuntary liens, which include²:

• Tax liens based on unpaid property, state or federal income, or business taxes
• Mechanic’s liens by unpaid property contractors, laborers, or materials suppliers
• Judgment liens related to a court-ordered payment such as child support or unpaid debt
• HOA liens for unpaid fees, fines, or assessments due to your homeowners’ association

How Liens Affect the Home Selling Process

Selling property typically consists of exchanging cash for a property deed; but if the house has a lien against it, that means the homeowner doesn’t possess the full title to the property.

A lien is a complication that needs to be cleared in order for a buyer to obtain the full title. Beyond simply being a monetary claim to fulfill, many liens have the potential to end with a lien-holder foreclosing on and taking possession of a property.¹

Challenges in Selling a Home with a Lien

There are multiple issues when it comes to selling an encumbered property. Consider:

• Difficulty attracting buyers – Potential buyers and real estate agents are turned off by complications such as property liens. Most are looking for a move-in-ready situation, not just in regard to property condition but also in terms of the transfer of ownership. To buyers, accepting a lien means accepting a debt that the current homeowner owes—for most buyers, this is an automatic “nope.”
• Title clearance – Title search and clearance is one of the key goals during the weeks leading up to closing day. A lien against the property means that the title company and agents need to switch from rote practices and explore unknowns. These processes may involve lawyers, demand unique contracts, or pose an inability to clear a title prior to sale.
• Closing delays – Additional negotiation, reluctant buyers and agents, title confusion—all of these can mean more time and uncertainty before reaching closing day and the final sale of your property.

Can You Sell a House with a Lien? Options for Homeowners

Depending on your state, it’s possible to sell a house with a lien. But there are also ways to solve the issue prior to closing day.

Pay Off the Lien

Liens aren’t always on a homeowner’s radar. You may be unaware of a lien and only find out during a title search process.

For example, a mechanic’s (or contractor’s) lien is often temporarily placed against a property during a major home remodeling project until payment is received in full by the contractor, laborers, or materials provider. If the lien wasn’t removed due to a disagreement in final payment, you may have a leftover bill to pay that will trigger removal of the lien.

Consider the amount due and whether the process of disputing it or trying to sell with it in place will be costlier than simply paying it off.

Negotiate with the Creditor

Creditors are often willing to negotiate for a lower payment or easier terms—they’d rather get paid something now vs. halt a sale, which puts zero dollars in their pockets.

You can negotiate directly or with the help of a lawyer to request a settlement that you can afford in lieu of the full amount owed, particularly if the full amount includes interest and penalties in addition to a principal debt.

Invalidate the Lien

If you’re dealing with a judgment lien, you can return to the source and seek a court ruling to invalidate it. This could be based on^1,3:

• Exceeding a statute of limitations if one is written into the lien
• Improper procedure
• Improper purpose such as fraud
• Bad faith such as coercement

Another way to discharge a lien is through bankruptcy, which may allow you to avoid or discharge the debt, and thus remove the lien.

Use FlipSplit to Sell Quickly

In Southern California, homeowners have another option—working with FlipSplit. We’re a unique all-cash buyer with the ability to purchase homes that have liens in place and handle their discharge on our end.

Benefits of Selling to FlipSplit When Facing a Lien

A FlipSplit sale is the express lane on a highway vs. the winding country lane. We handle liens, property cleanup, repairs, and upgrades, taking on the stress and eliminating the uncertainty and lost time of traditional sales.

Avoid Legal Complexities

Instead of the lien falling on your shoulders to deal with, we take on the legal discharge of a lien as part of our purchase offer. You’re entirely free from dealing with creditors, lawyers, or courts to untangle your lien(s), and you can simply move forward without impediment after deciding to sell to us.

Faster Transactions

Selling a house with a traditional listing sale isn’t a quick process; even without a lien to deal with, it’s a matter of months rather than weeks.

On average, it takes 49 days for properties on the market to even receive an offer worth pursuing—and that’s only the first step in the property sale process.⁵ This timeline can easily balloon upwards with liens involved.

On the other hand, FlipSplit can close on your house in a jiffy—anywhere from three to 90 days based entirely on your convenience and schedule. A lien is simply part of an offer calculation to us rather than a yellow or red light.

And the same goes for the condition of your house. You don’t need to schedule time for clean-up, repairs, or remodeling. We’re an off-market cash home buyer ready to purchase your home entirely as-is.

Fair Market Offers

We aren’t a company that comes up with offers designed to take advantage of homeowners who need a quick sale. Our offers are entirely data-driven; they’re based on current value calculations, surrounding real estate market trends, and our estimate of what investment we’ll need to make in updating the property before reselling it.

For homes with liens, we simply include that cost in our calculation of value before we extend a guaranteed cash offer to you. And unlike other cash buyers, you’ll see proof of the fairness of our offer! If the property is resold by us for:

• Exactly as we predicted, you’ll know your offer was on the nose at market value
• Lower than calculated, we eat the loss and you’ll know you got a great deal
• Higher than we calculated, we split those extra profits 50/50 with you!

Take Control of Your Home Sale with FlipSplit

Dealing with a lien on your home while trying to sell it is an added layer of stress that no one needs. Instead of coming up with cash before a sale to clear the lien, or trying to attract buyers in spite of it, explore working with FlipSplit.

We work with you on a personalized plan based on your individual and property needs, then take the hassle out of the sale process—no need for costly repairs, agent fees, inspections, or closing costs. Plus, you’ll get half of any extra profits after we update and resell your home! Visit FlipSplit for a no-obligation cash offer today for your Southern California property.

Reviewed by: Brandon Brown

As a long-time Asset Manager, Investor, Real Estate Agent, and Broker/Owner of BayBrook Realty in Orange County, Brandon Brown is one of FlipSplit’s lead Real Estate experts. Having worked on over 2,000+ real estate transactions, Brandon brings a depth of knowledge that ensures clients are appropriately treated with honesty and integrity. His insights and advice have been published in numerous blogs beyond FlipSplit, and he keeps a close eye on market trends and statistics, which are updated weekly on his social media pages. Outside work, you can find him participating and serving at church, cycling, mountain biking, surfing around Orange County and beyond, and enjoying time with his wife and two daughters.

Sources:

1. Talkov Law Corp. 5 Tricks to Selling a House in California With a Lien or Judgment. https://talkovlaw.com/selling-house-with-lien/
2. Point. Can you sell a house with a lien on it? https://point.com/blog/selling-a-house-with-a-lien
3. Wagner Zemming Christensen, LLP. How to Dispute a Lien on Your Property in California. https://www.wzclawfirm.com/how-to-dispute-a-lien-on-your-property-in-california/
4. Bankrate. How long does it take to close on a house? https://www.bankrate.com/real-estate/how-long-to-close-on-house/
5. Bankrate. Sell My House Fast in Los Angeles. https://www.bankrate.com/real-estate/selling-a-house-in-los-angeles/