When a property is in a lien, it means that the homeowner owes money to someone. The lien could be from an unpaid mortgage, tax debt or can even come from a judgment against them for something they didn’t pay (child support). There are many reasons why you might owe money and have no ability to pay off your debt.
If you find yourself in this situation and want to sell your house fast with liens attached, there are some things you should know about Tennessee laws before selling. In this guide, we will go over what happens when you sell a house with liens on it in TN and how to do so successfully!
What is a Property in Lien?
A lien is a claim against your property that others are aware of. To sell your home and provide a clear title to a buyer, you must first pay off the lien. In many cases, liens apply to real estate, but they can also attach to personal belongings in certain circumstances.
Many states offer protection for mortgage lenders, allowing them to attach liens to your property. Although some have lien rights under the law, others must go through the court system first. The following are examples of times when a creditor may put a lien on your property.
Voluntary and Involuntary Liens
Borrowers who take out a mortgage or automobile loan might be required to put up the purchased property as collateral. This is referred to as a “voluntary lien,” implying that if the borrower fails to make payments on time or breaches (breaks) some other condition, the lender may foreclose on the property or repossess the vehicle.
However, not all creditors require a borrower’s consent in order to file for a lien. Some lenders may acquire these rights without your involvement. These liens are referred to as “involuntary liens.”
Creditors with Involuntary Liens
Some creditors have the legal authority to attach a lien to your property. Others may acquire lien rights in court. Here are some examples of non-voluntary liens.
Unsecured creditors, such as credit card debtors, health care providers, and personal loan borrowers, must first file a lawsuit, win the case, and obtain a money judgment before being able to seize your property. A judgment creditor may put a judgment lien on your residential property if they have the judgment in hand.
Other Types of Involuntary Liens
A creditor may lawfully register a lien on your property without filing a lawsuit. However, some liens are bad; some are not. Below are some of the different types of liens you may encounter.
Property tax liens. Typically, a property tax lien takes precedence over any other liens or mortgages on the property, even if the property tax lien was initiated after the other liens. If you do not pay your taxes, the government may sell your home to recoup its money. The government must follow whatever procedure the state prescribes, and you might have the opportunity to pay the taxes and costs and get your property back even after the “sale.” If you don’t pay your taxes to protect your mortgage, the lender will usually pay the taxes and add that to your mortgage debt.
IRS liens. The IRS (internal revenue service) can place a federal tax lien on all of your assets if you don’t pay back taxes after receiving notifications. The IRS may view this as the first line of defense if you’re unemployed, self-employed, or employed only occasionally, and the agency would have difficulties attaching your income. Creditors with a property lien are in an advantageous situation since they can wait until the home is sold or refinanced before receiving payment. However, because the IRS dislikes waiting, it may push for a sale if your debt is significant and you have unpaid taxes.
Child support liens. If you owe a significant amount in child support or alimony, the other person can put a lien on your home. The lien will remain in place until you pay the amount owed, sell or refinance your property, or have it foreclosed upon by the recipient, whichever comes first.
Mechanic’s or Materialmen’s liens. When you hire someone to do a service, such as renovating your home, and you don’t pay the bill, you may be served with a mechanic’s lien against your property. In most states, the contractor must record the lien within one to six months of not being paid. The contractor then has one year (or less) to sue you to enforce the lien. If the contractor wins the case, he or she may be able to order your house to be sold.
Mortgage Lien. A mortgage lien is a financial claim on your property that acts as collateral for your loan. This implies if you default or stop making mortgage payments, the lien allows the lender to take possession of and sell your house to recover any remaining debt. If you’re getting behind on your mortgage payments, make sure to reach out to your loan provider to set up a payment plan to avoid a foreclosure or from having to file for bankruptcy.
HOA Lien. A homeowners association (HOA) lien is a legal claim requiring the property owner to pay delinquent dues. Typically, when you initially buy your home, these costs are rolled into your downpayment; however, if you don’t make future payments on time or fail to do so at all (due to delinquency or foreclosure), the HOA can place a lien on your property.
Tax Lien Laws in Tennessee
Tennessee is one of the states that require both a ‘Notice of Right To File A Lien” and “Intent To File A Lien” to be mailed out to any persons that payment owed hasn’t been received. This notifies the person(s) of the intent to file a lien and steps to pay off the amount before a lien is placed.
Unfortunately, if you don’t make any effort to pay off the lien against your property, tax lien laws in Tennessee permit a delinquent tax sale to proceed. A delinquent tax sale is a last resort effort made by a city or county to collect past due taxes.
In Tennessee, counties may sell properties at public auction to recoup taxes owed if the property owner fails to pay them in a reasonable amount of time.
However, in Tennessee, tax lien laws also have specific rules of a delinquent tax sale and do allow ‘Right of Redemption.’
Right of Redemption means a delinquent taxpayer, his/her heirs, and any creditors holding a lien against the property has one year from the date the Chancellor signs an order confirming the sale to redeem a property sold at a tax sale auction by paying the winning bid amount plus 10 % interest to the court. But the redeeming party must hold an equitable or legal interest in the property.
Can You Sell a Property in Lien in Tennessee?
Is it possible to sell a property in lien in Tennessee? Yes, it is! It may even be the fastest way you can remedy the situation and pay off the lien entirely. That doesn’t go without saying that there are several extra steps involved with the home sale process. However, a home can be sold “as-is” when a lien or judgment is attached to the property or seller.
Typically though, most prospective buyers don’t know how to purchase a home with a lien. Instead, they see a title problem and take that as a red flag.
If you were to work with one of the companies that buy houses in Memphis, however, they understand what is involved with the whole process and have experience with these types of transactions.
Even if you’re concerned that the debt exceeds the real estate value of your home, you can still sell a house with a lien against it in Tennessee.
How to Sell a Property in Lien in Tennessee
Selling a house with a lien against it is different from a traditional home sale. First, you’ll want to find a real estate expert who can contact the lien holder to negotiate for a partial or full release of the property lien. Fortunately, judgments from creditors are rarely set in stone. Savvy lien-holders will likely take something rather than nothing. Just ensure that you know your rights and that you don’t provide too much info to the creditors.
Another benefit is you typically don’t have to pay these settlements before closing- property liens against your home can be paid in several ways.
Often, a seller will pay off these debts at closing, which are deducted from the home sale proceeds. This would mean that you likely wouldn’t have to pay any upfront costs, that is, if you find the right title experts.
So to move forward with selling your home, here are the initial steps you’ll want to take:
- Evaluate the property lien. Figure out what type of liens or judgments are against you or the property you need to sell. You can find out this information by having a title search done for your property. A property title search in real estate is the process of examining public records and retrieving documents on the history of a piece of real property to determine and confirm the property’s legal ownership, previous owners and find out what legal claims or liens are on the property. This information can be found at the county records office. Figuring out what type of lien you have will help since the procedure for each lien is different, and some types of liens are non-negotiable, while others may be settled.
- Find a qualified buyer. Locating someone interested in buying a home with a lien against it can be difficult. Many buyers and real estate agents see liens and judgments as major issues requiring everything to be paid in full. Also, if the creditors aren’t easy to work with, they may not be willing to release the lien. So try to find someone who understands your need to sell your house quickly and also knows how to secure the lien release.
- Work with an expert. Working with someone who understands your situation and has experience with buying a house with a lien can make all the difference in the world. An experienced real estate investor or title company can guide you through the process and provide advice on what to say to creditors when settling the lien.
Use My House Sale for Repayment
A homeowner who wants to sell their property but has a lien against it can use the sale of the house as repayment for the lien. For example, if you’ve built up a lot of equity in your home, selling it could provide a way for you to pay off the lien and purchase another home.
Furthermore, this would give you the chance to have control of the home sale instead of it being sold in a delinquent tax sale to pay off the lien.
Keep in mind that if you do decide to sell, the process can take some time. Memphis homes, on average, sell after 82 days on the market. That doesn’t include the time it takes to make repairs, declutter or stage your home. You’ll also need to figure out a selling strategy, hire a realtor or sell by owner, and secure the lien release or pay off the lien. If you need to sell your home quickly, you may consider other options like selling your house as-is to a cash home buyer.
Sell House to Cash Home Buyer
Another option for selling a house with a lien is to sell it directly to a cash home buyer. Selling to a “buy my house Tennessee” buyer has many advantages, especially if it is difficult to obtain a mortgage to buy a new home or refinance your current property due to its lien status. By selling a house for cash benefits, you’ll be able to get a cash offer for your home, sell as-is, avoid paying for costly realtor commissions, and may even get closing costs covered. Usually, an offer for your house can be made within 24-hours, and the buyer can close in as little as 7-14 days. In addition, this home selling option involves less hassle and the ability to pay outstanding debts quickly.
Sell House As-Is with Lien Attached
A third option for selling a home in Tennessee is simply listing it “As-Is” and attaching the lien notice as part of the sale contract. By listing the house as-is, buyers understand that they are getting the home with existing conditions and problems.
Buyers will have to go through a closing process where they pay for the lien against your home in full before taking ownership of it. This can often take several months, so in some cases, to resolve the lien and avoid your home being sold by the lienholder, you might have to pay the lien yourself.
There are several options for selling a house with a lien attached in Tennessee, from sale by owner, through selling to a cash buyer, and even taking foreclosure action against your property. The good news, though, is that you can sell a house with a lien against it in TN. You’ll just need to figure out which option works best for you and what you’re trying to accomplish. For many people, selling a house in TN without taking on more debt is the primary goal.
If you’re at all confused about the type of lien against your home, seeking the advice of a real estate attorney would be helpful. Make sure you find one with years of experience to help guide you through the process.
If you own a home with a lien attached to it and would like to sell, contact Fair Cash Deal. They are a local home buying company that purchases houses as-is in the Memphis area including, Germantown, Bartlett, Cordova, and even Southaven, MS. When it comes to buying houses, they understand the ins and outs of the whole process and can handle unique selling situations. Feel free to reach out to us to find out how it works or get a cash offer for your home.