What It Really Means When There's A Lien On Your House

There are plenty of steps that have to be taken before closing on a house. From the position of the seller in a real estate deal, even after you've found a buyer and have agreed on an offer for your home, there is still an important step both parties have to perform before having the contract drawn up. To ensure there are no complications regarding the ownership of the home, you and your real estate team should perform a property title search. This search will check various avenues to ensure there are no legal ties against the property in the form of liens. Essentially, a lien is a legal hold on the property that has been approved by the owner of the property in question or, in some circumstances, a court of law, according to Forbes.

A lien can be issued in many forms, including a tax lien for failure to pay property or income taxes, a child support lien, and a mortgage lien if the owner hasn't made the agreed-upon payments. This type puts up the property as collateral so that when it's sold, the entities can collect the money owed to them from the sale proceeds. These can be issued by a mortgage company, a bank, the IRS, or even construction companies if, for example, they were not paid for work done on new housing projects.

When selling your home, it's crucial to perform your due diligence and ensure there are no liens on the property. In most cases, you cannot have the title to the home transferred out of your name until these debts have been repaid. However, having a state, federal, or tax lien against your home does not necessarily mean you can't sell the property. In fact, in the final stages of working out the nuances of a real estate sale, you could stipulate that the buyer agrees to be responsible for paying off the lien or that you, as the seller, will use the earnings from the sale to pay off the lien before getting your share.

This being said, it would be in your best interest to take care of any debts attached to your property before putting it onto the real estate market. Having caveats such as liens associated with your home may warn off potential homebuyers and have them moving on to the next seller. If you want to proceed and attempt to sell a home with a lien attached to it, then discussing your options with your real estate team is a good idea, as laws may differ from state to state. This will give you a clearer idea of your rights as a seller and could also help you to possibly negotiate with your creditors and have your debts reduced.