What You Can Do About a Lien on a House From the Previous Owner?

Buying a home is massive financial and personal decision. It’s nearly impossible to keep emotions out of the equation—the hope and anticipation when waiting to see if the sellers will accept your offer, and the anxiety during inspection and closing. 

But no matter how many fingers you’ve crossed, there’s always a chance that something will pop up and slow or halt the closing process. The inspection may find something big, or the parties involved may disagree on subsequent negotiations, or the mortgage company may decide not to lend sufficient funds. 

Another big potential dealbreaker is finding a property lien on the home. This can easily stop a deal dead in its tracks. However, if you’re not willing to give up on your dream home, and you’re committed to resolving the lien, you have options. For tax liens, you may need the help of a tax professional, and one option is to hire a tax attorney, who will have more in-depth knowledge and skills for resolving property tax liens. 

The Basics of Property Liens 

When a creditor remains unpaid and wants to secure their right to payment, they can place a legal claim on an asset or property with a lien. A property lien gives the lien-holder the right to payment in the event that the asset is sold. 

In the case of property liens, an unpaid contractor may place a mechanic’s lien on the house, or a court may impose a judgment lien on real estate for other debts. Another very common type of lien is a tax lien, imposed by the state or federal government for unpaid taxes.  

These are all examples of involuntary liens, and these cause the biggest headaches. (A voluntary lien, like a mortgage lien, typically does not cause problems during the home buying process.) Property lines are attached to a property, not an individual—so if the house is sold without resolving the lien, then the new owner becomes responsible for it. 

A federal tax lien supersedes all other creditors, which means that the federal government is the first one to get paid if the asset is sold. Lenders usually will not loan money to someone with a property lien, especially if they know the IRS will get paid before they will. 

However, it is possible for the federal government to give other creditors priority through an approved tax lien subordination. This can give debtors some relief to refinance and repay debts. 

RELATED: What Is a Federal Tax Lien Subordination? 

How to Know If There is a Property Lien 

Outstanding liens are generally public record, but that doesn’t mean they are easy to find. There are several ways that you can search for liens. 

• County records: Liens attached to land records can be found by manually going through deeds and other county records. Unfortunately, not all liens can be found this. 
• Court records: For judgment liens, you may have to sift through court records or do an online case search to find a record of the lien. 
• Online tools: There are online databases that may have information on liens, especially for cities and highly populated areas. These typically can give you information if the lien is due to unpaid property taxes. 
• Title company: You can hire a title company to search for liens and other title issues on a property. 

Lenders typically require performing a title search and purchasing title insurance during a home sale. Often, this is when the lien is discovered. 

RELATED: How to Find Out if a Property Has a Lien On It 

How to Resolve Property Liens 

If you are financing your property, then the lien typically must be resolved before the lender will finalize your mortgage. If the seller doesn’t have the cash to release the lien and you still wish to go forward with the sale, you may be able to work with a real estate attorney to identify property liens and negotiate with the sellers to factor paying off the lien into the purchase price. 

For tax liens, hiring an experienced tax attorney can help you find out how much is fully owed between unpaid taxes, interest, and penalties. They may be able to help you negotiate with the IRS for a payment plan, or at least advise you on the different options for paying off the debt. 

If you are paying cash for a house, again, you should be aware that liens are attached to the property’s title and not the lien holders. If you become the property owner, you inherit the liens and therefore are responsible for the owed money.  

An experienced tax lawyer will be familiar with liens and can offer you solutions to keep the sale moving forward. The best way to resolve a lien will depend on your particular situation. 

Contact S.H. Block for Help with a Lien from the Previous Property Owner 

If you’ve discovered that the previous homeowner had a lien on the property, resolution may be a complicated process. An experienced attorney can make all the difference in the home buying process if you need to have a lien removed. 

For a free consultation on what we can do about a property lien on a home you’re interested in buying, call us at (410) 872-8376 or fill out this form. Our team will quickly set up a meeting to talk about the specific details of your situation, and let you know how we can help. We know how excited you are to move in to your dream home, and we want to help you achieve that dream! 

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.