When a lien ‘leans’ on the sale of your property, consider your options

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Published Date 1/6/2023

“Hey, Mr. Cunningham. How's your entailment getting along?” When To Kill a Mockingbird’s Jean-Louise innocently asked that question, she didn’t really understand how the man that showed up at their door with hickory nuts had limited power over his own property.

The same goes for a lien (or perceived debt) on your property, which can prevent you from selling it. Basically, it means that before the transaction can go through, you’ll have to deal with an encumbrance that was placed on the property by entities that claim you owe them money.

Think of a lien as an unpaid debt. It’s a legal notice that’s placed on a file such as unpaid real estate taxes, or a mechanic’s or construction lien that may have been placed by a contractor who’s done work on your home but hasn’t been paid.

When you sell your home, a title company is brought in to determine whether a seller has the legal right to sell the property. To do that, the title company searches public records for liens on the property, meaning anyone claiming a portion of the money should the property be sold.

Most sellers are already aware of liens filed on their property. But for some, it may come as a surprise, according to Realtor.com’s Jeanne Sager. “For instance, there may be a recent lien for which you haven’t been notified yet, or it may be so old you may have even forgotten it was there. The lien may also be the previous homeowner’s responsibility, but went undetected during your own title search when purchasing the house.”

The process goes like this: If a lien is found, the title company will contact you and inform you how much (as well as who) you owe. The sale will stop dead in its tracks unless the lien is paid or released, and it falls on the seller, often paid through the transaction's proceeds. Once it’s paid, you will get what’s called a “release of lien” from the entity that filed it in the first place, proving you’ve cleared the title. It is then and only then that the sale will be permitted to go through.

To get a lien release, you can (1) provide proof (in the form of receipts or otherwise) that there is no debt owed, or that it was paid already (2) pay or agree to pay the lien at closing with the proceeds from the sale of the home, or (3) dispute the lien and get a court decision requiring release of the lien without payment. The last option can delay the closing significantly, so it would be the least desirable avenue to pursue.

If it’s all a big mistake, and the lien is a debt that went undetected during your own title search when purchasing the house, the title company will contact the old owner and ask for a release of the lien to record.

Realtors advise anyone in this situation to look at it the same way they would if they found a surprise collection on their credit report or even a last-minute demand from a seller or buyer. Even if you see it as patently unfair, fighting it may cost you more out of pocket. So consult with your Realtor or title company representative as to your options.

Realtor, TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Guardian Mortgage, a division of Sunflower Bank, N.A.