A lien is a legal claim to your personal property such as your home or other real estate which you own. A lien can legally be placed on your property when you owe money to a person, company or organization. If you are planning on selling your home, and you have a lien on your property, you may be required to take certain steps in order to complete the sale of your house.
Liens on a home or piece of real estate are common in real estate. If you obtained a mortgage to purchase your home, your mortgage holder is the primary lien holder. The lender on a second mortgage or home equity line of credit is the secondary or subordinate lien holder. The lender maintains a lien, or legal claim, to your property until you satisfy the mortgage loan.
Additional Lien Types
There are instances where you may be assessed with a lien that has nothing to do with your mortgage. If you fail to pay property taxes you owe on your home, the county can place a tax lien on the property. A lien may also be placed on your home for unpaid water or sewer bills. Any creditor can place a lien on your home if you use the home as collateral for a credit transaction. Liens may also be placed on your property if you owe money to any service professionals who have conducted work in or outside of your home. Such workers include construction workers, plumbers, electricians and landscapers.
Selling Your House
A lien on your property will not prevent you from selling your home, and in some cases, your property could be confiscated and sold to pay liens you owe. If you plan to sell your home on your own, however, conduct a title search or contact your county recorder, clerk, or assessor's office to verify whether there are liens on your property. Keep track of the total lien amounts and take the total into account when you decide on a sales price. After your home is sold, all lien holders will be paid out of the sale proceeds. You will only receive money if a balance remains after the liens have been satisfied.
In some cases, the final sales price of the home may not be enough to satisfy all liens placed on the property. You can request that a federal lien be discharged to allow the completion of a sale. You may also go to court or work with the lien holder to make alternate payment arrangements in order to discharge the lien and complete the sale.
- The Bigger Pockets Blog: Property Lien Search: How to Find out if there are Liens on a Property
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
Sara Melone is a mother of three and a graduate of UNH. With prior careers in insurance and finance, photography, as well as certifications in fitness and nutrition, Melone draws directly from past experience and varying interests. She contributes with equal passion to birth journals, investment blogs, and self-help websites.