With most homeowners in this difficult position, looking for just one answer more than anything: can I even sell? Almost always, yes.
Liens and back property taxes aren’t a red light in the path to sale. Think of them like a mortgage, they are ownership-linked debts, and get physician from the sale at in closing before any equity gets into your hands. Very rarely will you ever have a single penny to pay up front, before listing, upon an offer being received or when it goes to closing.
Having said that, however, not all liens are a equal. Some come with tight deadlines. Similarly, total debt that is greater than the value of a home will take an altogether different approach. This guide tells you everything about it, bluntly.
Whether you’re facing property tax delinquency, a judgment lien, an IRS tax lien or a HOA lien, plus how to eliminate a mechanic’s lien (read the full article). If this is time sensitive due to a tax sale, or foreclosure, or pressing on forcing a sale call Eagle Cash Buyers at (833) 330-1625 right now. In such cases, timing is truly everything.
What Is a Lien on a Property?
In other words, it is a legal claim against your property that is filed and recorded in the public record. It allows someone who lent you money to take priority over the proceeds of sale over whatever you receive. Liens help convert unpaid loans, taxes and contractor bills from a liability from you personally, to one on the property to which those liabilities are attached that can now be enforced.
In practical terms, that means no property can be sold with open liens since it won’t have clear title. Before any real estate transaction can happen a title company does a title search, exposing every recorded lien. This includes all of the above that have to be addressed, resolved and paid out from the net sale proceeds, settled for less with a compromised value or disputed by way of litigation before clean title can transfer to a buyer.
This is also why it can be so stressful with there are liens. These are not debts you can just defer. They are permanently recorded in the chain of title and stay with each transaction until they are cleared up.
The good news? You practically never pay for resolution before you pay it out of your pocket, unless it is paid at signing. Learn how this fits into the mortgage payoff process by reading our article, What Happens To My Mortgage When I Sell A House For Cash?
Types of Liens on a Home
The first thing to identify is what kind of lien you are dealing with.
Mortgage Liens (Voluntary Liens)
This is the most common type of lien and easiest one to clear. When you signed your mortgage, your lender took the assurance of a lien on the house. You agreed to it. At close, the title company will directly pull the funds from your sale proceeds and disburses them to your lender. That is what typically happens in most every mortgaged property sale. Nothing unusual about it.
Involuntary Governmental Liens (Property Tax Liens)
A fifth area in which debts can often linger is for property taxes. These are super-priority in nearly all states in this country, meaning they get paid before your mortgage lender, before any other creditor, before you take home so much as a penny of equity. These are some of the highest priority liens that you have to deal with because most counties will eventually go through a tax lien or a tax deed sale to recover what they are owed.
Federal Tax Liens (IRS Liens)
If the IRS has assessed tax liability and filed a Notice of Federal Tax Lien, that lien attaches itself to your property. Serious, but workable. The IRS has a number of programs such as Certificates of Discharge which will allow you to sell a particular property free of the lien, as well as payment plans. It doesn’t just disappear. See IRS guide on Federal Tax Liens for the whole story of your options.
Mechanic’s Liens (Construction Liens)
Anyone who did work for your home and was not paid, including a contractor, subcontractor or supplier to the property could file a mechanic’s lien (sometimes called construction lien or materialman’s lien) on the property. These are commonly raised in construction disagreement or for cost overruns. Filing deadlines and enforcement rules differ greatly by state.
HOA Liens
Fall behind on a couple homeowners association dues, assessments or fines and the HOA can file a lien against your home. HOA liens are, in a handful of states and 22 cities, a super-priority lien similar to that of property tax liens, meaning they get paid off ahead of the mortgage lender. In others, they are subordinate to the mortgage. Either way, you’ll have to deal with them at or prior to closing.
Judgment Liens
If someone wins a civil judgment against you, because of a slip and fall, breach of contract or for unpaid medical bills, for example, they can generally record that with the county as a lien on your real estate. This bind up all real estate that you own in any given county without your consent.
Child Support or Alimony Liens
Most state will impose a lien on your house for overdue child support or alimony. These work like judgment liens but have priority rights under state law.
What It Means To Be Delinquent on Property Taxes
Back taxes are overdue property taxes, those annual bills your county or municipality sends you based on the assessed value of your property. Unpaid filing fees accrue penalties and interest. The county collects via tax lien sale or tax deed foreclosure after a statutory period (usually somewhere between one and five years depending on the state).
The rules differ by state:
Lien States (New Jersey, Florida, Illinois Etc): The county sells an investors tax lien ceritificate and the investor collects interest from owner for unpaid taxes. The investor would then have a right to foreclose unless the homeowner pays that debt within a certain time frame, known as the redemption period. NTLA Property Tax Law Library, NTLA provides State property tax law resources.
Deed state (Texas, Georgia and others): The tax office sells the property at a tax deed sale if taxes are not paid within the statutory time period.
Hybrid allstates: A mix of both methods.
If it is a federal tax lien, the IRS site should be your first stop.
What every homeowner needs to understand: Unpaid property taxes aren’t just written off. They compound. Every month they are unpaid, fine interest and administrative costs accumulate. If a tax lien certificate has already been sold on your property, an investor may be able to initiate foreclosure if you do not redeem quickly enough. As long as you sell before that, your equity is safe.
The Handling of Liens at Closing
This is the part that most homeowners don’t know, and in fact, it could be the most calming. This is what the standard process looks like:
Step 1: Title Search
Before the closing process, the title company does a comprehensive search of public records and finds all liens, encumbrances, judgments, and taxes due on a property. This is a procedure that any respected title company must take.
Step 2: Payoff Statements Requested
The title company reaches out to all existing lienholders, your mortgage lender, county tax office (your bill is already delinquent), HOA (if you don’t pay it then within a certain timeframe must be paid by the Seller at closing!), contractor, and even IRS will need to provide an official payoff statement along with any taxing or offacting – You also should have everyone that attaches unattainable value somehow untouched! These exactly match the dollar amount required as of the settlement date, including interest through that date, along with penalties and fees.
Step 3: Closing Funds Collected
When it comes time for closing, those buyer’s funds are deposited into an escrow account owned by the title company. Yes, that’s the buyer’s wire transfer for a cash sale. Those funds are distributed by the title company in order of lien priority: property taxes come first, primary mortgages second, then junior liens (like HOA, mechanic’s and judgment liens), then closing costs, then to you for any remaining equity.
Step 4: Lien Releases Filed
All lienholders then file a release of lien with the county recorder as each is paid off. In some states and depending on the lien this may also go by satisfaction of lien or discharge of lien or deed of reconveyance. It removes the lien from title in an official capacity.
Step 5: Step Involves Clear title transfer to buyer.
Following release of all liens, the title company prepares and sends a title insurance policy to the buyer and records the new deed.
Fun Fact: You usually will not schedule lien payoffs as the seller. As each lienholder is paid from the proceeds through the title company. You should be forthright about any known liens and that the amount you sell them for is enough to pay off the liens.
Four Scenarios That Complicate Liens
Most of the time, liens get worked out at closing. However, there are four situations that complicate matters considerably.
Scenario 1: Sale price is less than the total balance of all liens
If the sum of your liens, mortgage, back taxes, fines, judgment liens, is greater than what you expect to get for it in a sale, then you have negative equity. The proceeds won’t cover everyone. That usually means negotiating a short sale with one or more lienholders, although it can be made up in cash at closing.
Situation 2: A Disputed Lien
All other times a lien is erroneously filed. A contractor may have a mechanic’s lien for work that was never performed or a judgment lien showing your property threatened because someone with the same last name, but not you, was actually the target. Disputed liens must either be negotiated or litigated out before or at closing. Without a court order or voluntary release by the lienholder, a title company cannot take it off.
Scenario No. 3 Federally tax lien not dischargeable
One of the most complex types is a federal tax lien. Also a property is being sold does NOT just make the IRS release its lien. The IRS must either be fully paid out of the sale proceeds or issue a Certificate of Discharge, which allows for that piece of property to be freed from the lien although many additional pieces of property may still remain encumbered. The actual application process usually takes from 30 to 45 days. The IRS Publication 783 explains the official way how to do this and it also has,
Applications are submitted on IRS Form 14135.
Situacion 4: Property on the verge of a tax sale or foreclosure
Time is your best friend when a county is looking to sell your tax lien to an investor, a creditor initiates foreclosure or the tax deed sale has already been set. Certain tax deed sales can result in the loss of the entire property. As fast cash buyers, sometimes we are the only thing that stands between your equity and a court-ordered sale of your home that robs you of it.
Traditional Listing vs. Cash Sale When There Are Liens
The difference between cash for home versus a traditional listing is far greater when you deal with liens or back taxes than any other homeowner thinks.
Challenges With a Traditional Listing
Mortgage lenders providing financing to retail purchasers often will not sign off on a loan if the title search uncovers fruit salad of liens, occasionally requiring that everything be cleared before any additional financing issues can proceed.
- Sellers’ agents often badger clients against title problems instead of helping them work through problem assets.
- Standard listing windows of 3 to 6 months lead tax penalties to keep increasing, and lien interest adding up, creating a risk that the property hits a tax sale deadline while still on market.
- Most financed buyers reject properties that have an IRS lien, and without proper coordination the lien may not be automatically discharged at closing.
Advantages of a Cash Sale
Eagle Cash Buyers: with real world experience orchestrating multi-lien closings with title companies, including lien-encumbered properties.
- There is no lender so resolving title is much easier.
- A close in as little as 14 days gives you less time for penalties and interest to accrue, which also decreases the chances of the tax sale taking place before closing.
- You don’t personally deal with lien payoffs, the title company takes care of it all out of your sale proceeds.
Cash Sale Process With Liens or Back Taxes
Step 1: Eagle Cash Buyers — Call Now
Visit eaglecashbuyers. Fill out the short form at MyVictoria. Give us a brief overview of the historical significance of the property, liens or back tax. No reason will get you disqualified from getting an offer.
Step 2: We Assess the Property
We assess the property condition, analyze recent sales around the area and factor in all known liens along with estimated payoffs and repair costs. Your word used to listen the number is real, it does not get reduced later.
Step 3: You Get a Cash Offer for Free
And within 24 hours a firm cash offer arrives. No pressure, no commitment. Review it at your pace.
Step 4: The Title Company Open Escrow
After your acceptance, we hire a local licensed title company to open an escrow and perform a full title search and will list all recorded liens and encumbrances.
Fifth, Please Order Payoff Statements
The title company will reach out to each lien holder, your mortgage servicer, your county tax office, the IRS (if you owe them money), your HOA agreement (homeowner association) and any contractor or judgment creditor, and ask for official payoff statements with a per diem interest through the date of closing.
Step 6: Liens Are Coordinated
Standard liens? Coordination is handled directly by the title company. IRS liens? The process for Certificate of Discharge is managed by the title company or a tax professional. Disputed liens? Negotiation may be required. Eagle Cash Buyers help throughout, you are not going through any of this alone.
Step 7: Closing Day
Eagle Cash Buyers, for example, will send the cash to the title company’s escrow account. Title companies pay lienholders in order of priority. You are wire or check the remaining money, if there is any. That lien release gets filed with the county. The deed transfers. Done.
Step 8: You Get Your Net Proceeds
Your offer amount is disbursed to you minus all lien payoffs. No fees, no agent commission, no closing costs for you. The numbers are black and white before you ink your signature. Check out our how it works page for the full break down.
Pie Type: Comparison of Lien Sort, Ease of Sale
| Lien Type | Ease of Selling | Typical Resolution | Urgency Level |
| Mortgage Lien | Easy | Paid at closing from proceeds | Low (unless in foreclosure) |
| Property Tax Lien (small balance) | Easy | Due at closing by the title company | Moderate: interest and penalties compound |
| Excessive or Not Too long ago due Property Tax Lien | Moderate | Note: In some cases, if an investor already holds a lien certificate on the same property, this will need to be negotiated before you pay them; paid at closing | High: tax sale deadline risk |
| HOA Lien | Easy to Moderate | Paid at closing from proceeds | Moderate: some HOAs can foreclose |
| Mechanic’s Lien (uncontested) | Moderate | Financed from proceeds or negotiated at closing | Low unless creditor initiates enforcement |
| Mechanic’s Lien (disputed) | Challenging | Must negotiate, release or litigate | Low to Moderate |
| Judgment Lien | Moderate | Settled with creditor or proceeds of settler | Moderate: lengthy delays permissible for creditor to initiate order sale |
| IRS Federal Tax Lien | Challenging | Discharge Summary or Full Payoff Needed | High: The IRS is able to seize and sell property |
| State Income Tax Lien | Moderate to Challenging | State dependent; must payoff in lump sum, or pay in installments | Moderate to High |
| Child Support Lien | Moderate | State enforcement agency payoff required | High priority in many states |
What If Your House Is Worth Less Than What It Is Owing?
Underwater, when total liens against a home exceed what it would sell for, is hard. But it’s not a dead end.
Option 1: Short Sale Negotiation
In a short sale, your lender and/or other lienholders agree to release their liens so that you can sell the property for less than the full amount you owe. This is subject to the lender’s approval, and it can take weeks or months without a guarantee of success. Your credit does take a hit, however, generally not as negatively as a foreclosure. Your basic rights as to short sales: A simple resource from the Consumer Financial Protection Bureau (CFPB).
Option 2: Cash at Closing
If the difference is modest, you can bring cash to closing to make up the difference. You would have to pay to terminate clean with a clean title transfer.
Negotiate Your Liens Down
Alternatively, you can negotiate individuals liens down.
Judgment lien holders and certain mechanic’s lien holders may negotiate a settlement for less than the amount owed, especially if they realized that they would receive nothing during a foreclosure when senior liens eat up all sales proceeds. This is something to investigate before giving up hope and just paying the whole amount.
Alternative 4: Deed in Lieu of Foreclosure
In the worst case scenarios where your total debt is far greater than property value (and none of these alternatives work), you may be able to “deed in lieu” of foreclosures and transfer ownership of the property directly to your mortgage lender for a release on that mortgage. This free option is available from a HUD-approved housing counselor.
Option 5: Minor Cash Sale With Small Equity Contribution
In these cases, even if the property itself is at a marginal negative equity position, a cash buyer can still finish on the property, provided that he/she puts just some money towards meeting up with the difference. The upside for you, though, is that you are leaving the house on your own terms and in your own time frame, and you aren not hit with a foreclosure to the detriment of your credit.
Local Property Taxes vs. IRS Federal Tax Liens
This is a stark contrast to the two very distinct and separate obligations that are commonly confused with each other.
Local Property Taxes
Property taxes, assessed value, then set annually by your county or city, pay for local schools, road work and municipal services. When they go unpaid:
- Interest and penalties accumulate from the due date, usually 1% to 3% monthly subject to the lesser of state law panel amount.
- The county may either sell a tax lien certificate to an individual or company, or allow it to go from one- to five-years before taking possession of the parcel and selling the actual property through a tax deed sale.
- Once your tax lien certificate is owned, you have a redemption period to pay it off with interest and get clear title. The investor could then foreclose if the great time passes without a payment.
Highlights: local property tax liens trump just about everything, even your mortgage. Your county may go to a tax deed sale, auctioning off the property and potentially paying your mortgage lender next to nothing or even nothing at all, and you usually get nothing. Act before that point.
IRS Federal Tax Liens
When you have an unpaid balance of a federal income, payroll or estate tax that the IRS assessed and requested payment for, this creates a federal tax lien. After that, the IRS will file a Notice of Federal Tax Lien in your county public records where you live.
- An IRS lien attaches to all of your property, both real and personal.
- It is valid for a period of 10 years from the date of assessment, plus any extensions.
- A sale of the real estate does not necessarily extinguish the lien. Paying the IRS from the proceeds or getting a certificate of discharge from it.
Provides IRS Offer in Compromise, Installment Agreement and lien subordination for eligible taxpayers. When you do a cash sale where the proceeds significantly pay off the IRS lien, the title company will immediately payoff IRS with closing funds, and therefore release your lien. If the proceeds are not sufficient, then a Certificate of Discharge must be applied for, this takes about 30-45 days. Apply using IRS Form 14135. Making IRS lien early allows enough time for coordination
Eagle Cash Buyers’ Solution: What You Can Expect
For Eagle Cash Buyers, lien-encumbered and tax delinquent properties are not edge cases. These are the most frequent scenarios we find in our clients.
Whether it is a first position or second mortgage, we will buy. Tax deed properties, judgment lien properties, HOA arrears, mechanic’s liens and more, we closed on them all. You can still get an offer even with liens.
We only work with licensed title companies in every state we serve. The title company handles all lien payoffs. There is an experienced team that walks you through that process when you sell to Eagle Cash Buyers.
We understand urgency. Upcoming tax sale date? Judgment creditor seeking a forced sale? Foreclosure auction already scheduled? You know what needs to go down and title work will allow you to close in as little as 14 days? Contact us anytime at (833) 330-1625.
Transparent offer math. We take into consideration all liens we are aware of and we make our offer based with the as is condition of the house. We never give one number and then lower it at closing. You close at the date you want after your net proceeds left over from payoffs of all liens is set, no closing costs to be paid by you, no agent commissions.
No pressure. Our offers are fully no-obligation. Do not make the decision without taking as long as you need to consult a tax professional, housing counselor or attorney.
We are in 44 states, such as Ohio and Texas, Florida and California, Georgia and Illinois, North Carolina and Pennsylvania. We’ve represented first-time home buyers who needed to wriggle around complex mortgage rules, homeowners on the brink of foreclosure, homeowners years overdue property tax payments and have IRS liens on their homes; and homeowners who thought they’d be stuck with their house forever. Most of the time they left with cash in their pockets. Read verified homeowner reviews here.
If You Have Liens or Back Taxes, Your Initial Steps
So, if you are reading this because you currently have liens or back taxes on your property, here is where to start:
Know exactly what you owe. Call your county tax assessor’s office to obtain the exact even balance of outstanding property taxes, penalties and interest. Your mortgage servicer will give you your current payoff balance. IRS Liens Call 1-800-829-1040 or log in at irs Title search: A title company can also conduct a preliminary title search to reveal any judgment’s or other liens you may have missed.
Understand your timeline. Is a tax lien certificate already being sold on your county on your property Is a tax deed sale scheduled? Are you in an active foreclosure by a lender or creditor? If the answer is yes to above find day date. That is your hard deadline.
Calculate your equity position. Summate all liens: mortgage, back taxes, junior liens. Now contrast that total with what your home would honestly sell for right now as-is? A cash sale can solve it all if you have equity and put money into your pocket. If the liens are equal to or greater than the value, then use a short sale or one of the other options above.
Get a no-obligation cash offer. Just know what a cash buyer will really pay before you cross off your options. You may well be more equity than you think, and a firm offer provides you with a real basis on which to negotiate. Offer on your property for no fee using Eagle Cash Buyers.
Seek advice for complications, or anything difficult. For big IRS liens, hire a CPA or Enrolled Agent. Free Counseling: A HUD-approved housing counselor will counsel you for mortgage workouts or short sales. Contact a real estate attorney for disputed liens.
Frequently Asked Questions
Can I sell a home with a lien on it?
Yes. Liens are usually paid at closing out of the sale proceeds. You do not typically have to pay these off, but before your listing goes live or you accept an offer. The title company distributes funds from the buyer to each lienholder in the order of their priority. One of the quickest methods for dealing with a lien-encumbered property is an all-cash sale.
Title To Limbo: Can I Sell My House With Unpaid Property Taxes?
Yes. In fact, unpaid property taxes are treated like any other lien and paid at closing from the proceeds of sale. Your equity comes only after the county is satisfied. On the other hand, if your county has already auctioned off the tax lien certificate to an investor or scheduled a tax deed sale, you could be racing against a hard timeline. Eagle Cash Buyers will close in as little as 14 days if need be.
The IRS can place a federal tax lien against your property, whether it is your personal residence or an investment property.
It depends, yes, but it needs to be sloooow. If the sale price is sufficient to satisfy the IRS lien, it will be paid off by the title company at closing, and the lien will be released. If proceeds are still inadequate then a Certificate of Discharge must be obtained from the IRS, this can take 30 to 45 days. Eagle Cash Buyers partners with title companies that have experience in this process and walks sellers through it.
What iS the process of liens when selling a house?
Before closing, a title search is conducted and any liens are found. The title company obtains payoff statements from all lienholders, then pays them off in a prioritized order with the closing proceeds. The last lienholder that was paid off files a lien release with the county. Whatever equity is left after paying all the liens goes to you.
Q: Do liens on my property affect credit?
The liens on the property itself will not necessarily show up on your personal credit report, however. But the base debt behind the lien, whether unpaid taxes, an IRS assessment or a court judgment, is what now can impact your credit. Even more importantly, if a lien holder takes the property into foreclosure or forced sale, that process is highly damaging to your credit. Engaging to sell early, even for cash, is a far better protector of your credit than letting the foreclosure go through.
Do Our Liens Exceed Our Equity, Will I Have To Bring Money To Closing?
Should you have liens totaling more than the sale price, you would need to either bring money to the transaction or work out a short sale with one or more lienholders. You need to analyze this and Eagle Cash Buyers can help you with that. When there are liens involved, negotiating them down can allow a clean cash sale even with a negative equity situation. You get a solid baseline with no obligation to work from through our offer.
Then, How Long Does It Take To Sell A House With Liens?
Most cash closings take about three to four weeks and can include traditional liens like a mortgage, past due property taxes, an HOA lien or a small mechanic’s lien. For example, for complex liens like an IRS tax lien requiring a Certificate of Discharge, that can add another 4 to 6 weeks to the timeline. Liens that require legal action to contest can take even longer. One of the main reasons is that beginning earlier provides the most time to address any of these issues before they turn insurmountable roadblocks.
Does Eagle Cash Buyers Buy Houses With Multiple Liens?
Yes. Usually, you deal with mortgage liens combined with property tax delinquencies, HOA liens, judgment liens and mechanic’s liens. This is all factored in when we make our offer and to everything that needs to happen at closing. You see your net proceeds after all liens are paid before you sign and there are no additional fees/commissions charged to you.
When selling I let lienholders know?
Generally no. Each lienholder is contacted directly by the title company at closing. In the case of IRS federal tax liens, though, do not wait even this long, contact the IRS (you or your tax professional) as soon as you start any Certificate of Discharge process. You may want to immediately check with your county tax office exactly how many days are left if you are racing against a tax sale deadline.
Get to the bottom of liens before listing vs. let them get taken care of during closing?
In general, for most circumstances, there is not much beneficial to do this at closing and significant downside often. So you are wasting liquid cash, the liens do not disappear until actual releases are filed and the funds are tied up per se till closing anyway. The sole exception to this is for when a lienholder (like the IRS) is making an significant discounted settlement offer on getting it paid off early. If so, get some advice from a tax professional before making any decisions.
