If you have a house with a lien, you may be wondering if you can sell a house with a lien on it. While it’s challenging, it’s far from impossible. By finding the right buyer (usually someone willing to make a cash offer upfront), you can get rid of a house with a lien attached.
Can You Sell a House With a Lien on It in PA?
Yes. Homeowners can sell real estate with a lien, but they must clear the title first.
When a buyer tries to buy a home, the seller needs to have the undisputed right to that home. That’s why the buyer needs to run a title search. You can do a title search yourself, but it takes time, which is why many buyers use a title company to do the work for them.
A title search will uncover property liens. The seller must first take care of all liens, either by paying off the debt or disputing debt errors. That’s why liens are so powerful and why creditors use them. They know that the borrower can’t ignore them.
What if you don’t have money to pay off your lien? Don’t worry – you can work your debt into the proceeds of the home sale. You can also find a cash buyer willing to pay off your debt for you in exchange for a lower price on your home. Cash home buyers in Springfield buy houses with liens all the time.
Unless you have the cash to pay off your debt or can negotiate your debt amount so you can afford to pay it, selling to a cash buyer is your best option.
House Lien Laws in PA
There are different types of liens that creditors can place on a home. A lien is a public notice that the creditor files with the county clerk stating they have a right to take possession of the house due to a debt the homeowner needs to pay off.
Let’s go over some different kinds of liens.
The first category is a voluntary lien, which is when you agree to put up your home as collateral for a loan. An example is a mortgage lien, which is for guaranteeing your mortgage payments. You can still take out an additional loan on your home, which can place a secondary lien on your property.
There are also involuntary liens, which lenders can place on your home without your consent. They will record these liens in the county records office, so they are also public knowledge.
An example is a federal tax lien for unpaid taxes, which the IRS can place on your home if you take too long to pay your taxes. In addition to an IRS tax lien, the state can also place property tax liens on the homes of people who have not paid their property taxes.
Pennsylvania can place a lien on your property for any type of taxes, including income taxes, employer withholding taxes, inheritance taxes, and more. It will send you a letter notifying you of the lien.
Here are additional types of involuntary liens:
- A judgment lien is when someone has won a lawsuit against you in court and places a lien on your home for the amount they won.
- There is also the mechanic’s lien, which is when you hire a contractor to do work on your home, but you don’t pay them.
- An HOA lien is when you fail to pay your dues to your Homeowners Association, and they take out a lien against your home.
- If you should be paying child support but fail to do so, the court may also impose a lien on your property.
Remember, every lien is a public record, and home buyers can see it by conducting a simple search. Liens show that someone has a legal claim to your property, and they make it extremely difficult to sell your home if you don’t have the money to pay off your debt.
Sell your house without a realtor in Pennsylvania today, even if it has a lien!
Process for Selling a House With a Lien Attached
If you want to sell a home with a lien, you’ll first need to get a lien release agreement, which the creditor signs, showing you have satisfied your debt and the lien is no longer valid.
There are a few ways to do that. The simplest way is to pay off the debt. However, you may not have the money to do that. In addition, you will have to pay interest on top of the original loan amount (or the taxes you owe, in case of an IRS lien).
Another option is coming to an agreement with the creditor. You can come up with a payment plan, for example, that satisfies the lender and allows you to pay off the debt and remove the lien immediately so you can sell the home.
If you have limited funds, you may renegotiate your debt. Many lenders are happy to settle for a lower amount if you can pay that entire amount upfront. They’d rather get something than nothing.
For example, let’s say you owe $50,000, including interest. However, you don’t have the money, and there is a low likelihood you will ever pay off the debt. The lender knows that. While they have a lien on your home, it would be much more convenient for them to get cash from you directly.
They may waive your interest or settle for a smaller amount, like $35,000, to get the money immediately and release your lien. It’s a win-win for both of you, as it saves the creditor hassle and uncertainty as well.
Yet another option is disputing the debt. You will need to go to court to do that, whether you’re fighting the entire debt or only part of it.
If you have multiple properties and you want to sell a specific one with a lien on it, you may be able to transfer the lien to another property. That’s a complicated process, though, and it can take time.
What if those options don’t work? Selling to a cash buyer is the best course of action for many homeowners. Cash buyers have experience buying homes with liens.
You usually have a few options. One option is using the proceeds from the sale to pay off your lien.
A real estate attorney can get your creditor to temporarily release your lien so you can sell your home and then pay off your debt. Alternatively, you can get instructions from the creditor allowing you to use your sale proceeds to pay your debt. You will then use an escrow service to take care of the actual process.
A cash buyer may also be willing to pay off your debt upfront. They can take on the responsibility of paying your loan, but they’ll usually want something in exchange: a better price on your home.
Selling a home with a lien to a traditional buyer is virtually impossible, as nobody wants to deal with the hassles involved. Cash buyers are typically the exact opposite, though; they have no problem buying homes with liens on them. If you want to sell a house fast in Philadelphia, even with a lien, sell it to a cash buyer.
When you sell to a cash buyer, you can also save on the usual fees to pay when selling a house.
Documents Needed When Selling a House With a Lien Attached
While selling any home requires multiple documents, there are additional documents that you must get as a homeowner selling a house with an attached lien.
The most important document that you’ll need, in all cases, is the lien release document. A lien release document is a letter from your creditor showing that you have paid off your debt. Both of you will need to sign this lien release agreement.
You don’t always have to pay off your debt in full to get this document. You can negotiate a payment plan, for example.
Note that even after signing the lien release document and filing it with the relevant government office, it can take time for the public lien notice to go away. Try to sign the lien release agreement as soon as possible. Still, it can take time for the government and lender to process everything and officially release the lien from public records and the electronic system.
Another document you might need is a payoff letter. The payoff letter is a letter from your creditor with instructions on how to pay off your debt. It’s essential if you want to work your debt payments into the home sale.
For example, the payoff letter can contain instructions to use the home sale proceeds to pay off the debt. You then provide that letter to your escrow service, which will take care of the rest.
Once you have removed the lien, you might want to run another title search to show that there are no more outstanding liens against your home. Remember, there can be multiple liens on a home, and some may take precedence over others. A new title search report will show that the title is clear, and you can now sell your home.
So, can you sell a house with a lien on it? Yes! Though, having a creditor file a lien on your home can be frustrating, especially when you don’t know how you will pay off your debt. One of the easiest ways to get the headache off your hands is to sell your home to a cash buyer who will assume the responsibility of paying your loan.
We buy houses Pennsylvania owners are selling, including homes with liens on them, so get in touch with us today.