Can You Sell a House with a Lien on It in Maryland?

Selling a house in Maryland is a significant undertaking, and when there’s a lien on the property, the process becomes more complex. 

In Maryland, as in many other jurisdictions, a property with a lien can still be sold, it just involves several more steps and can cause closing delays. This is especially true regarding houses with involuntary liens.

As reputable property buyers in Maryland, we have bought several houses with liens. In fact, many of the home sellers we buy houses from have some sort of lien that needs to be paid off before the property can be sold.

Whether you’re a homeowner that wants to sell or an investor seeking to divest, understanding the implications of selling a house with a lien in Maryland is vital.

In this article we explore the key aspects of how it’s possible to sell your home with a lien in MD. You’ll discover the different lien types, how to address them, and ways to minimize closing delays for a successful home sale.

What is a Lien on Your Property?

A lien is a legal claim against your real property that states you owe money to a specific creditor or entity.

Some liens give the creditor the right to repossess your house if you fail to pay while other liens can wait to be paid if and when you sell the property.

Liens can be voluntary, such as in the case of the mortgage you took out to buy your home, or they can be involuntary.

Involuntary liens are judgments accrued from unpaid debts, such as if a contractor is hired to perform work on your house but they aren’t paid in full for one reason or another, they may place a lien against your home.

Can You Sell Your House with a Lien Attached?

While it’s possible to sell a house with a lien attached, the process usually involves addressing the outstanding debt before completing the sale. Potential buyers are sometimes cautious and more likely to pull out of the sale when a house has an involuntary lien, as these can be harder to clear than voluntary ones. Disclosures and negotiations with lien-holders are commonly used to pay the lien and facilitate a home sale in Maryland.

Common Types of Property Liens: Voluntary and Involuntary

House liens can be voluntary, such as a mortgage lien, or involuntary, like a tax lien or judgment lien. Each type of property lien comes with its own implications for selling the property.

Mortgage lien

A mortgage is the most common type of voluntary lien. When you use a mortgage to finance the home, yur lender places a lien on the property. The lender does this as a form of security for the loan. This allows the lender the legal right to repossess your house and attempt to recoup their “losses if you fail to repay the mortgage within the agreed upon terms. 

Tax lien

A tax lien is an involuntary lien that is imposed by the local government when you fail to pay your property taxes. As long as the delinquent taxes go unpaid, your local government can make a claim on your property. Some towns and cities in Maryland will send properties to a tax sale, such as is the case of the Baltimore City tax sale.

Judgment lien

You’ll find your house with a judgement lien if you are ordered to pay back debt by a court settlement or the courts determine you owe another party money. In this case, an involuntary lien is placed on your property as a way to secure the debt for the other party. Typically, judgment liens are paid in the event you sell or refinance your property but a court can order the sale of your house in order to satisfy the lien.

Child support and alimony liens

In some cases, individuals who owe past due child support or alimony may face involuntary liens on their property as a way to ensure compliance with court-ordered payments.

COA or HOA lien

Condominium owners’ association (COA) and Homeowners’ associations (HOAs) have the authority to put involuntary liens on properties of their members for unpaid fees or assessments. COAs and HOAs place liens in an attempt to collect unpaid late fees, attorneys’ fees and costs, and collection fees.

Mechanics lien

Another type of involuntary lien is that of the mechanics liens are involuntary liens. Mechanics liens are typically filed by contractors, subcontractors, or suppliers who are seeking payment for the work performed and materials purchased during home improvement projects. Such a lien on your home allows contractors to claim an “interest” in the property until debts are paid.

7 Steps to Sell a House with a Lien

Selling with a lien against your property involves a particular set of steps to reduce headaches and stress during the sale process. Below are seven steps to resolve liens placed on your home so you can sell fast!

1. Assess Your Situation

Begin by gathering all necessary documents related to the specific lien(s) on your property. Seek guidance from professionals such as real estate agents and attorneys who can provide valuable insights tailored to your situation.

2. Determine Lien Type

Understand the various types of liens, including tax liens and mechanic’s liens, and their implications. Discuss how the priority of liens can impact the sale process, influencing the order in which creditors are paid.

3. Resolve Outstanding Debts

Develop strategies for negotiating with lien holders to settle outstanding debts. Explore alternatives like payment plans or loan modifications to address financial obligations and facilitate the lien release process.

4. Title Searches and Clearances

Emphasize the importance of conducting a thorough title search before listing the property. Recommend hiring professionals to handle any necessary lien clearances, ensuring a clean title for potential buyers.

5. Disclose Liens to Potential Buyers

Explain the legal obligations regarding the disclosure of existing liens to potential buyers. Provide guidance on best practices for transparency during negotiations, building trust with interested parties.

6. Utilize a Settlement Agent

Outline the steps involved in selling a property with an escrow or title company handling the financial aspects. These professionals play a crucial role in coordinating the transfer of funds and ensuring a secure and legally compliant closing process to resolve the liens on a house.

7. Finalize the Sale

Highlight potential challenges that may arise during the closing process, particularly in deals involving liens. Encourage sellers to seek legal advice if needed to navigate any complexities that may arise and ensure a successful sale.

By following these steps and seeking professional guidance, homeowners can navigate the intricate process of selling a property with a lien, addressing legal obligations, and minimize the chance of your house not selling..

Ensure a Smooth Closing: 5 Strategies to Avoid Title Issues and Delays

If you’re selling a home in Maryland with a lien, it’s essential to take proactive steps to prevent title issues and closing delays. Here are five ways to navigate the process more smoothly:

Clear Outstanding Liens Before Listing

Before putting your home on the market, work on clearing any outstanding liens. This might involve negotiating with the lienholder to settle the debt or paying it off entirely. A clear title is attractive to buyers and helps avoid last-minute issues during the closing process.

Disclose Liens to Potential Buyers

As the property owner, it’s your responsibility to be transparent about any existing liens when listing your property for sale. Full disclosure is not only ethically important but also a legal requirement in many jurisdictions. This upfront honesty can help build trust with potential buyers and prevent surprises later in the process.

Collaborate with a Real Estate Attorney

Engage a real estate attorney early in the selling process. An attorney can help navigate the legal complexities associated with selling a home with a lien, ensuring that all necessary documentation is in order and assisting with negotiations to clear the lien.

Negotiate Lien Releases

If there are liens on the property, negotiate with the lienholders to secure releases upon the completion of the sale. Clearly document any agreements reached, and ensure that the necessary paperwork is filed to release the liens at the closing.

Provide Title Insurance

Consider offering title insurance to the buyer. While this is often a buyer’s expense, contributing to or providing title insurance can be an incentive for the buyer and can protect both parties in case of unforeseen title issues, including those related to the existing liens.

By being proactive, transparent, and seeking legal guidance, you can minimize the risk of title issues and closing delays when selling a home with a lien. Open communication with all parties involved, including potential buyers, is crucial to ensure a smoother transaction.

Selling a house with a lien in FAQ

How does a lien affect the sale of your house?

Having a lien on your house does complicate the selling process a bit. Depending on the type of lien, it may negatively affect the transfer of ownership and your total home sale proceeds. Addressing the lien before proceeding with the sale of your house is usually advised.

How long does a lien stay on a property?

The type of lien you have on your property will determine how long it lasts. Tax liens usually remain until all back taxes are paid off or the property is sold at auction to pay off the debts. However, Maryland state tax liens expire after 20 years. Whereas mechanic’s liens typically expire within a year or two. Judgment liens, on the other hand, can last several years and may be renewable.

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

Usually paying off the lien will remove it within a few days and you can request a payoff letter from the creditor who issued the lien to show it was paid off. Disputing a lien or having an invalid lien removed can take several months.

What happens if I sell a house with a lien?

During the due diligence process, potential buyers conduct a title search, and the discovery of a lien can potentially hinder or delay the sale of your home. Most buyers prefer properties with a clear title, prompting sellers to clear any outstanding liens before a sale.

Can you sell a house with a lien on it yourself?

It is entirely possible to sell property yourself with liens, but it is a little more challenging. Many buyers are cautious about purchasing a property with liens, which can limit the pool of potential buyers. It’s crucial to disclose any known liens to potential buyers to avoid legal complications.

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