Unless she checks her credit report periodically, the average American will often not realize that there is a lien against her property until she applies for credit or tries to sell property.

A lien will stop the sale of your home until it’s taken care of.

A lien is a type of security for an unpaid debt, and it can be placed on a home, an auto, a boat, a business and any other type of property with significant cash value. It essentially keeps the property from being sold until the debt is paid.

There are several types of liens that find themselves slapped on a home. Among the most common are mechanic’s liens, tax liens and judgment liens. Let’s take a look at each.

Mechanic’s lien

Homeowners who have had remodeling or other construction work done around the home should check to ensure that the contractor or a subcontractor didn’t place a lien for non-payment.

“For example, if you are remodeling your bathroom and the supplier who supplied the bathtub isn’t paid by the general contractor, a lien can be placed against your house to recover the money,” warns the attorneys at FindLaw.com.

Even if you paid the contractor for the bathtub, you’ll be held liable if the contractor failed to pay the supplier for it.

No, it doesn’t seem fair, but the law presumes that you can sue the contractor for the money. When you’re knee-deep in a home sale, however, time is of the essence and court cases take time.

Tax lien

Don’t pay your taxes and the government can and will put a lien on your home. This includes federal, state and local governments.

Judgment lien

If you’ve ever sued or been sued in small claims court, you may be familiar with the judgment lien.

Investopedia defines the judgment lien as “a court ruling that gives a creditor the right to take possession of a debtor’s real property if the debtor fails to fulfill his or her contractual obligations.”

Liens Must Be Removed Before You Sell Your Home

Unless a buyer agrees to purchase your property subject to the lien—which most lenders won’t allow—the lien must be paid and officially released before the sale can close.

Here’s what to do if there’s a lien against your property:

  1. Verify the Lien

    • If you believe the debt isn’t valid, contact an attorney immediately.

    • If you agree the debt is valid, move forward with paying it off.

  2. Contact the Lien Holder

    • Get clear instructions on the payoff amount and process.

    • Negotiate a reduced payoff if possible—an experienced attorney may help with that.

  3. Obtain a Release-of-Lien

    • Once the debt is paid, have the lien holder sign a Release-of-Lien form in front of a notary public.

    • Forms are available through your attorney, the county clerk’s office, or online.

  4. File the Release-of-Lien

    • Record the signed release at the county recorder’s office to make it public record.

    • There’s typically a small fee for filing.

  5. Notify the Title Company

    • Work with your real estate agent to make sure the title company knows the lien has been cleared.

  6. Keep Records

    • Store a copy of the Release-of-Lien in a secure place for your records.

Important:
We are not attorneys and do not provide legal advice. For anything involving lien disputes or negotiations, consult with a qualified real estate attorney.