Selling your house even under the best of conditions can be a frustrating and challenging process. However, if you’re dealing with a house that currently has a lien on it, that adds a whole other layer of concerns you’ll have to handle. What really makes things hard is when you weren’t even aware of the lien until you or someone else did a property search on your title. Now you’ve got a whole problem to sort out that you didn’t even know about.
Realtor Magazine says that 11 percent of all closing delays come from title or deed issues. And oftentimes, that’s because of a lien on the title that the seller may or may not have even realized was there. Finding out you have a lien out of the blue can be quite the shock, but it doesn’t mean that you’re out of options when it comes to selling your house. Let’s run through what a lien is and whether or not you can sell your house with a lien. Let’s find out what a lien is and whether or not you can sell a house with a lien on it in Memphis.
Selling a House with a Lien
Basically, a lien is a person or company’s legal claim against a property based on an unpaid debt. They allow a person or organization to take property or take legal action against the property owner in order to satisfy any outstanding debts. Liens are usually public record, so that other potential creditors can see them and include that in their decision to offer loans or record.
One of the most important things for people to know is that liens are attached to the house or property. So if the transfer of ownership happens, that lien goes with it and becomes the new owner’s responsibility. This is what can make selling a house with a lien on it difficult.
Some people think that liens only come from governments or companies, but they can also be assessed in a variety of ways. If the homeowner hasn’t been paying child or spousal support, a court can put a property lien on the house. You could also have a lien put on your property over unpaid credit card bills or medical debts.
What Other Kind of Lienholders Are There?
Liens can come from two specific directions, both of which give a person, company, or organization a legal right to your property. They can also be brought about by legal action based on outstanding debts. Some of the types of liens you might come across include:
Materialman or Mechanic’s Lien: If you agreed to have a contractor perform work on your house or property, they expect to be paid for the work they do. If you refuse to pay or simply don’t pay, they can place what’s known as a materialman or mechanic’s lien on your property. Not only can the contractor do this, but a subcontractor who was not paid by the contractor can also come after you with liens in order to get paid. It can sometimes be easy to pay this, but you can also negotiate the lien payment into the sale price of the house.
Judgment Liens: If a creditor or organization wins a lawsuit against you, they will try to collect payment from you. As part of that, they could file a lien against any property that you own. This way, they’ll be able to get paid one way or another, even if you don’t want to pay them.
HOA Lien: Your homeowners’ association (HOA) can file a lien against your property over any kind of unpaid fees or broken rules that require financial restitution. Perhaps you cut down trees you weren’t allowed to or you make major changes to the structure of the house that will alter its value moving forward. Whatever violation of HOA rules, it could be enough to satisfy a lien.
Department of Revenue Lien: If you don’t pay state taxes, the Tennessee Department of Revenue could put a lien on your property. You can often work with them to make payments instead of the lien. You might even be able to move the lien to a different property. However, you’ll want to make sure you’re working with a tax attorney or CPA on the matter.
IRS Lien: Just like with state taxes, not paying your federal taxes can result in a lien as well. The Internal Revenue Service (IRS) can put one on your property for failure to pay federal taxes. Of all the liens, this might be the one you want to avoid the most as it can be very difficult to deal with. You will absolutely need to involve legal and accounting experts to help you figure out how to pay off the debt and get the lien removed before selling.
See if You Can Get Rid of the Lien
It is possible to sell a house with a lien on it, but if it is possible to lose the lien before selling, that’s the ideal scenario. The chances that a buyer on the open market is going to want to take over a house with a lien on it is very small. If you can afford to pay it off, negotiate with the lienholder on a solution that works or you. If you can’t see if they’ll let you pay a percentage of the lien to have it removed, which can happen.
Use Your Home Sale for Repayment
If you can’t negotiate the lien and can’t pay it off, you can still sell your house with the understanding that the lien will affect your sale profits. If you owe $100,000 on your mortgage and sell your house for $130,000, that would leave you with $30,000 in profit (not including closing costs). However, if there was also a $25,000 lien on the house, you’d use the proceeds from the sale to pay it off, leaving you with $5,000. If you don’t actually have equity after the home sale, you could end up using all of the profits to pay off the lien.
Sell Your House As-Is
Liens can create quite the hassle for you and a deterrent for buyers on the open market. It is possible to sell your house but the process can be complicated and cause issues between you and the buyer. There is often a lot of negotiation involved, not to mention legal or financial fees.
That’s why it might make more sense to sell your house as-is to a real estate investor like Fair Cash Deal. They will buy your Memphis house in its current condition, including any financial hardships or liens on the property. They’ll make you a fair cash offer on the house and then you can close in a matter of days on the sale. No more worrying about the lien and you get to have a fresh start with a new house without financial issues.