Home Under Lien: Sell Your House Now
When a creditor places a home under lien, homeowners fall into a tricky scenario. When a property title has a lien, homeowners face an extremely frustrating (and potentially intimidating) scenario.
Why is this?
Generally speaking, a lien constitutes a right for a credit to seize possession of the property. The lien is removed once the homeowner pays the debt or finds another way to resolve the matter. In the meantime, homes under lien appear as title defects during a title search.
Because of this, a smooth home sale quickly reaches an impasse. Oftentimes, homeowners learn the property lien for the first time during the real estate closing process post-title search. While this creates real estate closing delays, the sale is not dead just yet. Homeowners must take steps to resolve the property lien.
Types of Property Liens
While liens are inherently related to outstanding debt, they vary in whether they are voluntary or not, along with the type of debt.
Homeowners agree to a voluntary lien when leveraging their property as collateral. Voluntary liens occur when a homeowner makes another purchase (i.e., a second home, a new car, etc.). For instance, a mortgage lender or car dealer may require a voluntary lien if a homeowner has a weak credit score. When a homeowner agrees to a voluntary lien, they indicate to the lender that there are financial assets available to pay off a debt should default occur.
On the other hand, creditors place an involuntary lien on a property when a homeowner fails to pay off a debt. Involuntary liens are referred to as such because this is done without the homeowner’s consent.
Aside from the willingness of the property owner to place their home under lien, there are several types of liens. Some of them include:
Property Tax Liens
IRS Liens
Child Support Liens
Mechanic’s or Materialman’s Liens
Family Law Real Property Liens
Although the outstanding debt stems from differing sources, each of these are problematic for those attempting to sell their home now.
Paying Back Debt on a Home Under Lien
So, your home is under lien. Now what?
The simplest route requires homeowners to pay off any outstanding lien debt. Creditors place liens on a property as a result of unpaid debt in the first place.
Unfortunately, paying off the outstanding debt is not always possible. In many cases, homeowners do not have enough cash or liquid assets to finance the debt repayment. Otherwise, it is possible that they might have simply paid back the debt from the start.
Taking out a bond is also an option if you cannot afford to pay off any debts and remove the lien from your title. In order to smoothly close on the home sale, homeowners may take a bond to cover associated real estate costs and lien repayment. The home sellers can then pay back the bond with the home sale’s proceeds.
In the event that a home sale can continue, the home sellers can then dedicate sale proceeds to pay off the debt. In this case, the lien can and should be included in the settlement agreement. For this, the home sellers would collaborate with their real estate attorney on drafting the addition.
Contesting When a Home is Under Lien
For homes under lien, homeowners have the option of contesting the lien. Typically, this occurs when homeowners believe that the creditor unjustly or incorrectly placed the lien on their property. Occasionally, liens are recorded incorrectly; this necessitates help from a real estate attorney.
For properties with multiple different liens, homeowners tend to contact a real estate attorney for legal guidance. While an attorney may not be required for common liens, collaborating with an experienced professional lessens the burden on the homeowner.
Homeowners face stress and financial challenges with a home under lien. While this circumstance is daunting, collaborating with a real estate attorney helps to solve the problem. For legal guidance regarding homes under lien, contact a residential real estate attorney at Lee Scott Perres, P.C.
