The key to selling a home with a lien against it

Have you hesitated on selling your home because you have a lien against it? This isn’t uncommon. A lien gives a bank, government entity, or company the chance to get back unpaid debt by allowing the debtor’s assets to act as collateral for what you owe. If you don’t meet those obligations, the creditor can seize the assets. When you pay back the loan, the lien goes away. And if you’re unsure about selling a home with a lien on it, keep in mind that it’s possible to sell if you approach it with clarity and careful planning.

Here’s what to think about if you’re considering selling your home.

Liens are placed on property in North Carolina due to unpaid debts, such as property taxes, IRS debt, HOA dues, and contractor bills (referred to as a mechanic’s lien). You must settle the lien before you can sell your property. Until you can clearly transfer ownership, a title company will not issue title insurance until that lien is settled.

Fortunately, there are ways that you can remove a lien in North Carolina. You can negotiate a settlement with the lien holder for a lower amount. If that’s a route you’re interested in taking, you should get a lawyer involved to ensure this process happens smoothly. But if you have equity in your home, the best course of action is to pay the lien using the proceeds from the sale.

The key to selling a home with a lien on it is to start your title search early. While you can search tax liens on the North Carolina Secretary of State website, it’s wise to talk to a title company or real estate attorney to have them perform your title search. This search will give you clarity on the type of lien(s) on your home, who placed them, and what you owe.

Once you have clarity on what exactly you need to deal with, you can plan accordingly. The key is to work with a team of professionals who can help you tackle the lien. Make sure you work with an experienced real estate agent who understands lien issues. They will help you navigate it, as well as identify a closing attorney to assist. Your closing attorney can get involved early in the process. That way, you have the information you need to move forward with clarity.   

One of the biggest reasons you need to find a highly qualified real estate agent who knows liens is that they understand what’s critical to the process of selling a home with a lien. North Carolina law requires sellers complete a Residential Property and Owners’ Association Disclosure Statement. This statement includes a section on liens.

If, for any reason, a buyer believes they have been misled by you as the seller, they can cancel the sale or pull you into a lawsuit down the road. That means hiding it can be detrimental, and it’s best to be honest about the lien from the start. Your agent will discuss what’s needed to ensure you can move forward with the sale with confidence.

Typically, a seller pays the lien using the proceeds from the sale of the home. The important thing to note is that the sale price needs to be enough to pay the remaining balance of your mortgage, as well as the lien. This is why it’s so important to work with an experienced real estate agent. Your agent determines the asking price for a home by researching comparable sales data, doing a market analysis, and assessing the condition of your home. Your agent needs to understand how payment of the lien will affect asking price.

After you’ve accepted an offer and made it to closing, your attorney will handle the details, usually within 24 hours. At this point, your mortgage lender receives the full payment for what’s due, the lienholder receives payment for the lien, and the remaining funds go to you.

Don’t let a lien on your home stop you from achieving your homeowning goals. Selling a home with a lien against it is doable. You must be transparent and proactive, and stay backed by a team that can help you every step of the way.