how to sell your house with a tax lien

Can You Sell a House With a Lien on it in California?

For California homeowners, dealing with a property lien can seem like a major roadblock to selling.

Yes, it’s a more complicated process, but it can be done in certain situations. The path forward is challenging, but you may have options.

In this guide to selling a house with a lien, we’ll answer:

  • What are your options with a lien?
  • Who buys houses with liens?
  • How quickly can you sell a property with a lien?
  • What options work even without upfront cash?
  • And more

If you’re ready to sell, working closely with a Southern California real estate investor can make quick work of the process, and if your home qualifies, you can put this challenging matter behind you and walk away from the streamlined sale with cash in hand.

What does a lien on a house mean?

black and white close up photograph of a legal text definition of the word Lien

So what does a lien on a house mean for you under circumstances when you are trying to sell? Let’s dive in and find out!

A lien on a house is a legal claim or right against the property by a creditor due to unpaid debts or obligations, securing the debt and giving the lienholder the right to a portion of the proceeds if the property is sold. There are various types of liens, such as mortgage, tax, mechanic’s, and judgment liens, each representing different debts.

Selling a house with a lien can complicate the transaction, as the lien must be resolved before or during the sale, often requiring payment of the debt to clear the title. Obtaining title insurance can be difficult with outstanding liens, as it ensures the buyer that the property is free of legal encumbrances.

Liens have a priority order, with mortgage liens usually having the highest priority, followed by tax liens and others. In some cases, liens can be negotiated or settled for less than the full amount owed, particularly if the property is being sold under financial distress or foreclosure. Understanding the implications of a lien is crucial for ensuring a smooth and legally compliant transaction.

Can you sell a house with a lien on it?

sold sign in front of a residential home

Yes, it is possible to sell your house if it has a lien on it, but the process involves specific and often complicated steps. A primary concern is obtaining title insurance, which can be affected by the type of lien in place.

From our extensive experience of 16 years, we have found that addressing liens early in the selling process can significantly streamline the transaction. For instance, resolving outstanding debts or negotiating with lienholders before listing the property can help avoid delays and complications.

If you intend to sell, partnering with a real estate investor who pays cash for homes can provide valuable guidance through the intricate process of determining whether selling your home with a lien is feasible.

Data indicates that homes sold to investors in such situations close 30% faster than traditional sales, enabling you to resolve the lien and move forward expeditiously.

Should your home qualify, we are prepared to make a cash offer, ensuring a seamless and efficient transaction.

Why you should act now

Consequences of not addressing a lien before selling:

Delayed or failed sales

If you’re thinking of selling your house without dealing with a lien first, you might want to think twice. While it’s tempting to put off handling liens until later in the sales process, this decision often leads to bigger problems down the road.

  • Many buyers walk away rather than wait for lien clearance.
  • Even eager buyers often can’t wait out the process.
  • Closing timeframes can extend from weeks to months.
  • Real estate agents may hesitate to list properties with known liens.

The discovery of a lien typically happens during the title search in escrow after you’ve already invested time and money in marketing your property. 

At this point, you’ve likely accepted an offer and begun making moving arrangements. When a lien surfaces, everything grinds to a halt. Buyers who initially seemed committed may reconsider rather than deal with the complications of your lien situation.

Even in California’s competitive housing markets, buyers have alternatives. 

Most have financing deadlines, moving schedules, and their own property sales to coordinate. Uncertain delays can force them to look elsewhere, especially if their lender expresses concerns about the property’s clear title status.

Legal risks

Legal troubles can surface if you try to sell without mentioning existing liens. California law requires sellers to disclose all known liens to buyers—skip this step, and you could face:

  • Lawsuits from buyers for material misrepresentation.
  • Substantial fines that often exceed the original lien amount.
  • Possible legal action for misrepresentation, including lawsuits or contract rescission.
  • Rescission of the sale contract, even after closing.
  • Liability for the buyer’s legal expenses and other damages.

California’s disclosure requirements are particularly strict compared to other states. Courts have consistently ruled in favor of buyers when sellers fail to disclose liens, even if the non-disclosure was unintentional. 

The legal principle of “constructive notice” means you are expected to know about liens on your property, even if you claim ignorance.

Real estate transactions fall under both contract law and real estate consumer protection laws. Violating these disclosure rules can result in penalties far greater than the lien itself, not to mention long-term damage to your reputation in real estate dealings.

Financial impact

Money problems tend to snowball as interest and penalties pile up on unpaid liens. What starts as a manageable amount can quickly grow into serious debt, eating into any profit you hoped to make from the sale

Some liens trigger extra penalties or higher interest rates the longer they remain unpaid. For example:

  • Property tax liens in California accrue 18% interest annually (1.5% per month).
  • IRS tax liens secure an underlying tax debt, which continues to accrue interest and penalties until paid.
  • Judgment liens typically accrue 10% interest annually under California law.
  • Mechanic’s liens may lead to foreclosure if enforcement action begins.
  • HOA liens often include escalating collection costs, late fees, and attorney fees.

The compounding effect can be startling. A $5,000 property tax lien can balloon to over $7,500 in just two years. During the sale process, these mounting costs come directly out of your proceeds at closing, potentially eliminating your expected profit margin.

Credit score effects

Your credit score might take a hit. While the IRS stopped reporting tax liens to credit bureaus in 2018, unpaid tax debt can still damage your credit if it leads to collections or wage garnishments. These credit issues can:

  • Make buying another property harder or impossible.
  • Limit your loan options for years to come.
  • Create long-lasting credit damage that affects employment.
  • Increase insurance rates and security deposit requirements.
  • Result in higher interest rates on future financing.

Though tax liens themselves no longer appear on credit reports, unpaid tax debt can trigger indirect damage.

For example, if tax authorities issue wage garnishments or bank levies, the underlying delinquency can be reported as a collection or defaulted debt.

Wage garnishments and bank levies don’t appear on credit reports, but the missed payments that led to them will. This means that even after resolving the lien, credit recovery can take three to seven years, depending on the severity of missed payments, collections, or legal actions.

While these issues are serious, they’re not insurmountable. Many California homeowners have sold their properties despite having liens. 

California-specific laws on liens

Following on from the financial and legal risks of leaving a lien unresolved, California has specific laws governing how long liens last, whether they can be renewed, and under what circumstances they can be removed. Knowing these rules can help you decide your next steps.

Lien Duration and Renewal

  • Most judgment liens in California expire after 10 years from the recording date.
  • However, lienholders can renew them indefinitely by filing a renewal notice before expiration.
  • Other liens, like mechanic’s liens, must be enforced within 90 days of filing, or they become invalid.

Removal Possibilities

  • Judgment liens can sometimes be removed if the debt was satisfied, settled, or discharged in bankruptcy.
  • Mechanic’s liens expire if the contractor doesn’t file a foreclosure lawsuit within 90 days.
  • Incorrect or fraudulent liens can be disputed and removed through California courts.

If you’re unsure whether a lien is still valid, check with the county recorder’s office to confirm its current status. Ignoring a lien—assuming it will expire—can backfire if the lienholder renews it before the deadline.

So, how and when can a house be sold with a lien on it?

a man holding up house keys with a house-shaped keychain

So, when and how can you sell property with a lien on it?

As we said, in certain situations, you can sell your house even if there’s a lien on it, but guidance is advised. There is a specific process involved with selling a home with a lien attached, and some of the best companies out there can help.

At Socal, we think we are one of these companies, so please reach out with any questions and we’ll do our best to help you out, but let’s take a look at your options.

Selling a House With a Lien: Your Options Compared

OptionProsCons
Pay Off the Lien Before ListingClears title, maximizes sale priceRequires upfront funds, which may not be available
Negotiate with LienholderPossible lower settlement amountCan take time, may not be successful
Dispute the Lien in CourtCan remove an invalid lienLegal fees and lengthy process
Use Sale Proceeds to Pay Off LienNo out-of-pocket costReduces net profit from the sale
Negotiate a Payment Plan with LienholderCould allow a sale while making paymentsNot all lienholders agree; can take time
Sell to a Real Estate DeveloperDevelopers may be willing to buy homes with liensOnly works if the location fits their specific requirements
Sell to a Real Estate InvestorFaster cash sale, no need to resolve lien firstOffer may be below market value, but saves time and hassle

Sell to a real estate developer

Occasionally, real estate developers are willing to pay for homes with liens on them in an effort to speed up the process. This is typically a matter of satisfying a specific need, such as where the property is located.

Pay off the lien prior to listing

If you’re able to pay off the lien placed on your property before you list it, it’s the simplest approach, but it’s not always financially feasible. If you do go this route, it’s important to obtain a copy of your release of lien letter from the lien holder as soon as your payment clears. This allows you to show any potential buyers that there is no legal claim against your title.

Pay off the lien with your sale proceeds

If you have enough home equity, you can use the proceeds from the sale of your home to release the lien. When it comes to how to remove a lien on the property, this is a good option for anyone who’s accumulated some equity in their home over the years but doesn’t have the resources to pay off the debt associated with the lien.  

Negotiate a payment plan

If taking care of the lien prior to or during the sale of your home isn’t a possibility, you can contact the lienholder directly, and they may be interested in negotiating a settlement – or payment – plan. This can lead to the holder granting release of the lien based on the payment plan, which puts you in a better position to sell.

Dispute the lien in question

If you believe the lien against your home is not legally valid, you can address the matter with the court in an attempt to have it dismissed. The lienholder involved will be tasked with proving the lien’s legitimacy, which is called perfecting the lien.

If you’re successful, such as if the 10-year statute of limitations that applies to liens has run its course, the lien on your house will be resolved. You can begin the dispute process by contacting either the title company or a real estate attorney.

How to Dispute a Lien in California

Illustration of a house with legal documents, a gavel, and paperwork representing the process of selling a house with a lien.

If you believe a lien on your property is invalid, you can dispute it through the California legal system. 

Here’s how:

Step 1: Verify the Lien’s Validity

Start by checking public records at the county recorder’s office to obtain a copy of the lien. Review important details such as the filing date, legal compliance, and expiration rules. 

For example, mechanic’s liens must be filed within 90 days of project completion, and judgment liens expire after 10 years unless renewed. If you spot errors, missing notices, or expiration, the lien may be unenforceable.

Step 2: Request Removal from the Lienholder

Before heading to court, send a formal written demand to the lienholder via certified mail, requesting removal. Clearly explain why you believe the lien is invalid, reference relevant laws, and include any supporting documents. Many lienholders will release invalid liens when challenged rather than face court proceedings.

Step 3: File a Petition in Court

If the lienholder refuses to cooperate, file a Petition for Release of Lien in the California Superior Court in the county where your property is located. For mechanic’s liens, the process is expedited, with hearings usually scheduled within 30 days. Include evidence such as the lien document, your demand letter, and proof of service.

Step 4: Serve the Lienholder

You must legally notify the lienholder by serving them a court-stamped copy of your petition and hearing notice at least 15 days before the hearing date. If the lienholder doesn’t respond or cannot provide proper documentation, the court may remove the lien by default.

Step 5: Attend the Court Hearing

On the day of your hearing, present your case clearly and concisely. The burden of proof falls on the lienholder to demonstrate the lien is valid. If they can’t do this, the judge will issue an order to remove the lien from your property.

Step 6: Record the Court Order

Once you receive the court’s lien removal order, file it with the county recorder’s office to officially clear your title. This ensures the lien no longer affects your ability to sell or refinance your property.

Timeline & Legal Options

  • The lien dispute process takes around 6-8 weeks, depending on court schedules.
  • If you believe the lienholder acted in bad faith, you may have grounds to sue for damages (such as slander of title).
  • In some cases, you may be able to recover attorney’s fees if you win your case.

Disclaimer

This provides general information about disputing liens in California and should not be construed as legal advice for your specific situation. Property law can be complex and varies based on individual circumstances. We strongly recommend consulting with a qualified real estate attorney before taking action on lien disputes.

Work with a local real estate investor

If you’re asking yourself, “What is the best way I can sell my house for cash in California quickly?” SoCal Home Buyers is on your side. If you’re ready to sell but aren’t sure how to begin, we offer a streamlined process that will analyze your unique situation – determining if you’re in a position to sell and, if so, determining your best steps forward.

We specialize in complicated home purchases like yours, and while traditional sales follow strict timelines, we can offer far more flexibility, allowing us to wait-out time-consuming complications that often stall sales involving property liens. We can even delay the transaction until you’re able to sell. 

We’re well prepared to assess the circumstances surrounding your home lien, and if we’re able to buy your property, we will streamline the sale process, assess the value of your home, and make you a fair cash offer.

If you’re prepared to sell and want to learn more about selling a house as is in California, SoCal Home Buyers invites you to reach out for more information about what we can do to simplify the process for you. Working with the right buyer can make all the difference when it comes to a matter as complex as selling a house that has a lien on it.

Steps to take before selling a house with a lien

If you’re unable to clear a lien before selling your home, you may be able to proceed with a sale. Your buyer, however, must be willing to pay off the lien at closing. Otherwise, the lien must be resolved with the proceeds of the sale before you see a return.

While most buyers shy away from purchases with liens on them, cash buyers are more likely to have the necessary flexibility to work with property owners whose homes are leveraged with outstanding debt in the form of liens.

We at SoCal Home Buyers have an impressive track record of helping homeowners who are ready to sell properties with liens attached, follow the complex steps forward. 

1. Determine if there’s a lien against your property

The first step in the process is verifying that there is a lien against your property. The fact is that it’s possible to face a lien without even realizing it. A prime example is when a creditor files a lien without notifying the homeowner.

How to find a lien on a property? The information is a matter of public record, and you can access it through the county where the property is located. If there is a valid lien against your property, It’s important to know that it doesn’t necessarily halt your ability to sell.

2. Determine the type of lien you’re facing

There are several types of liens in California, but most operate as legal claims against the property they’re attached to, and they can be enforced if the debt is not paid. Who can put a lien on a property? Consider the following prime examples of who can obtain an involuntary lien – or a lien that is sought in response to debts that go unpaid – in California:

  • An IRS tax lien can be placed on a home if the owner fails to pay property tax, which can take precedence over the mortgage itself. 
  • A property tax lien is similar to an IRS tax lien but addresses property taxes levied by the county. 
  • A judgment lien is issued by court order and generally relates to a debt that’s based on child support or alimony.
  • An HOA lien can apply when the homeowners association dues or fees go unpaid.
  • A mechanic’s lien, which is also called a construction lien, applies to unpaid charges for work performed on a property.

A mortgage lien that allows your mortgage provider to take possession of your home if you fail to make your mortgage payments is a voluntary lien, which won’t adversely affect the sale of your home.

Lien Priority Ranking (Highest to Lowest)

  1. Not all liens carry the same foreclosure risk. Some liens take priority over others, and certain types can lead to foreclosure faster.
  2. Property Tax Liens → Highest priority. Counties can foreclose after five years.
  3. Mortgage Liens → If unpaid, lenders can foreclose (after missed payments).
  4. HOA Liens → Can lead to foreclosure, but the process takes longer.
  5. Judgment Liens → Can be enforced but usually require court action.
  6. Mechanic’s Liens → Expire in 90 days if not enforced through foreclosure lawsuit.

3. Validate the lien before disputing it or reaching a settlement

In some instances, liens are not legitimate to begin with, and you can have the matter resolved through the legal system. If the lien is legitimate, however, you can attempt to negotiate a resolution with the lienholder.

4. Pay the lien and clear the title

If you have the financial ability to do so, paying the lien and clearing it with the title company is the easiest way to handle the issue prior to the sale. 

5. Consider your options

If your home is in a particularly inviting location, a real estate developer may be interested in purchasing it with the lien attached.

6. Consult with a Southern California real estate investor

Real estate investors pay cash for homes as they stand, including homes with liens attached. If you’re ready to sell, an investor can help evaluate your prospects and skillfully guide you through the sales process if selling is an option for you. 

Can I sell my house with a lien on it to you?

A realtor shakes hands with a client as a sign of a successful sale of a private house.

Can you sell a property with a lien on it to us?

Yes, we’re ready to discuss purchasing your home from you. At SoCal Home Buyers, we purchase homes throughout Southern California, and we have the financial flexibility and expertise to consider homes that come with liens.

We will effectively and efficiently guide you through the process, and if we’re able to make you an offer, the cash transaction will be faster than you expect. 

Can you transfer the property with a lien?

Yes, you can transfer property with a lien, but the lien remains attached to the property. The new owner assumes responsibility for the lien, and it must be resolved before they can obtain a clear title. It’s generally advisable to settle the lien before transferring the property to avoid complications.

Can you sell a house with a lien on it?

Yes, you can sell a house with a lien on it. However, the lien must be resolved during the closing process. The proceeds from the sale are typically used to pay off the lien, ensuring the buyer receives a clear title.

Here’s how easy selling property with a lien is:

  1. Contact us at 951-331-3844 or fill out the short form below to request your fair cash offer. Note: If you’re dealing with liens on your property, don’t worry. We have experience handling such situations, and we’ll do our best to find a solution.
  2. Await our prompt response to discuss your property and the liens in greater detail and schedule a one-time inspection. Note: Dealing with liens requires a comprehensive understanding of the situation, and our team will work closely with you to assess the property’s condition and lien status.
  3. Our in-house inspector will assess your property and liens to determine a fair cash offer based on the market value and the lien amounts. Note: The presence of liens may impact the final cash offer, but we’ll strive to provide you with the best possible solution to resolve the liens and purchase your property.
  4. If you’re on board with the offer, we’ll work diligently to address the liens and facilitate the sale process. Note: Resolving liens can involve negotiations and legal procedures, which may extend the timeline. We’ll work with you to find the most suitable closing date.

Throughout the process of selling your house with liens, we’ll handle the complexities and work towards resolving the liens to ensure a smooth transaction. While liens can add intricacies to the selling process, our experienced team is here to guide you through the steps and find a solution that works best for you.

Reach out to us today to discuss your situation further and learn how we can help you sell your California house with liens.

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Key takeaways

When it comes to selling a house with a lien, there are several key points to keep in mind, including:

  • If there is a lien on your property, selling it will be more complicated than using traditional methods, but it may be possible.
  • While the simplest approach is resolving the lien prior to the sale, this requires considerable financial resources.
  • If your property is especially well located, a real estate developer or another buyer may be interested in taking on the lien with the purchase, but this is the exception rather than the rule. 
  • The best option if you’re ready to sell is working with a real estate investor who will guide you smoothly through the steps necessary to determine if your home with a lien attached qualifies for sale and, if it does, will expedite the process.

FAQs

What is a lien sale on a house?

A lien sale on a house refers to selling a home that has a lien on it. Some buyers are interested in taking on the lien as a means of expediting the sale. Real estate investors buy qualifying homes and, in so doing, simplify the process considerably.

Can you sell land with a lien on it?

Yes, you can sell land with a lien on it, but you’ll need to take steps to ensure that you proceed in accordance with the law. The path forward is challenging, but a real estate investor who pays cash for qualifying properties with liens can help.

What is the most important first step for selling a house with a lien?

One of the most important steps you can take if you’re ready to sell your house with a lien is consulting with a Southern California real estate investor who has the expertise and resources to help determine if your home qualifies and to make a cash offer if it does.

Can someone put a lien on my house without me knowing?

Yes, someone can place a lien on your house without your immediate knowledge, but you will eventually be notified. Liens are recorded with the county recorder’s office, and the lienholder is usually required to notify you formally.

Who can place a lien on your house?

Entities that can place a lien on your house include creditors such as mortgage lenders, the IRS (for unpaid taxes), contractors (mechanic’s liens for unpaid work), child support agencies, and individuals or entities that have won a court judgment against you.

How long does it take to remove a lien from a property?

The time it takes to remove a lien from a property varies depending on the type of lien and the specific circumstances. Generally, once the underlying debt is paid or settled, the lienholder will issue a lien release, also called a lien discharge, which must be filed with the county recorder’s office. This process can take anywhere from a few days to several weeks, depending on how quickly the lienholder acts and the efficiency of the county recorder’s office.

What happens if I owe more money than my house is worth?

If you owe more money than your house’s value (known as being “underwater”), selling becomes more complicated. You’ll either need to pay the difference at closing, negotiate a short sale with your bank, or work with an investor who specializes in these situations.

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