What is a lien on a house?

Dive into the world of property liens. Understand the types and implications with our comprehensive guide on what a house lien means.

Catherine Collins
October 27, 2023

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When you’re buying or selling a house, a title company will search records to make sure there is not a lien on the home. A lien means another person or entity has a legal right to the home, which complicates the sale process. Typically, if you want to sell or refinance your house, but it has a lien on it, you have to pay your debts in full first to have the lien removed. Here’s what happens if a lien is put on your house and an explanation of the different types of liens in real estate.

What is a lien on a house?

A lien is a legal claim on a property. If a person or a business puts a lien on your property, it means you owe a debt to them. For example, if you don’t pay money owed to a contractor, the contractor can take you to court and get a lien on your home. This makes it so the contractor can eventually get the money owed to them.

How liens relate to real estate

Liens are part of a legal record. If a title company finds a lien on your house, you can’t sell it or refinance it until you settle your debt.

Types of liens on a house

Mortgage liens

A mortgage lien is the most common type of lien. If you take out a mortgage to buy a house, you’ll have a mortgage lien on your property. This means that before you take a profit from selling your house, you have to pay the bank back first.

Role of mortgages in homeownership 

As of 2022, only 23% of homeowners own their homes free and clear, according to an Organisation for Economic Co-operation and Development study. That means a large majority of people use mortgages as a path to homeownership. Homeowners provide a down payment to purchase a home, and a mortgage loan finances the rest.

Risks associated with mortgage liens

When you take out a mortgage loan, your home is the collateral for the loan. If you're not able to pay your mortgage, the bank can foreclose on your home in order to satisfy the debt to them.

During a foreclosure, the bank sells your house to recoup its funds, which means you have to find another place to live. Additionally, having a foreclosure on your credit report makes it challenging to secure another mortgage for several years.

Tax liens

Another type of lien is a tax lien. Homeowners have to pay property taxes. Even if you own your home outright without a mortgage, you have to pay property taxes. Property taxes are set by the city and are based on a few factors, like the value of your home.

Your tax money goes towards city improvements like sidewalks, roads, parks, and public schools. However, if you don’t pay your property taxes, the city can put a lien on your home.

If you don’t pay your federal taxes, the IRS can also place a lien on your property, too. 

How tax liens can affect homeowners

If you want to sell your home, having a tax lien on your home can make it hard to sell. Liens also make it challenging to refinance your house. 

It’s a good idea to pay any debts owed towards liens before listing your house. If you don’t, this could delay closing and cost you the sale of the property.

Steps to resolve tax liens

If you want to pay your tax lien, contact your city or the IRS and ask about your options. Tax liens can come with penalties and interest, so your balance may be more than you expect. 

It's possible that you can ask to be put on a payment plan to take care of your debt if you're not able to pay it in full. Keep in mind the IRS takes 30 days to release your lien after you’ve paid in full. So, if you want to sell your house soon, it’s best to resolve your tax lien issues as soon as possible.

lien-on-a-house

Judgment liens

Judgment liens are the result of a lawsuit from a creditor suing a consumer for a debt.

How judgment liens are placed on a property

If a creditor sues you and wins the lawsuit, they can place a lien against your house.

Consequences and resolution of judgment liens

Like other liens, a judgment lien makes it difficult to sell or refinance the house. If there is a lien against your house, you’ll need to settle it and pay your debt in order to have it removed.

Mechanic's liens

A mechanic’s lien is another type of lien that contractors initiate if you don’t pay them for work completed.

Who can file mechanic's liens

Service providers like contractors and even dry cleaners can place liens on your house if you don’t pay them for their work. The service provider has to take you to court and win a judgment against you in order to get the lien.

How to avoid mechanic's liens

In order to avoid expensive court fees, it’s important to pay service providers for their work on time. If there is a dispute over payment and work completed, try to come to an agreement with your contractor first to avoid a lawsuit.

Homeowners association (HOA) liens

An HOA is a homeowners association. There are many neighborhoods and communities with homeowners associations that are responsible for the community’s upkeep. 

Residents in those communities are required to pay HOA fees. In return, those fees might cover landscaping, trash removal, community areas, and more. 

Common reasons for HOA liens

If you fail to pay your HOA fees, your homeowners association can get an HOA lien on your property.

How to resolve HOA liens

If you want to resolve the HOA liens, you’ll have to work with your HOA to repay any unpaid dues, fees, and additional fines they may have put on your account.

What happens if a lien is put on your house?

During the process of buying or selling a home, a title company completes a search to ensure there are no liens on a property. If the title company finds a lien, the buyers might not want to purchase your home.

It’s likely you will not be able to sell your house or refinance it until you settle your debts and have the lien removed. In a worst-case scenario, you could lose your home or have expensive legal bills to resolve financial disputes.

How to prevent and remove liens

Conduct due diligence before buying a property

In order to prevent buying a house that has a lien on it, it's important to hire a title company to conduct a title search prior to closing on a home. A title company can do research as well as provide title insurance, which protects you financially should a lien come up that they missed during their search.

Meet your tax obligations

Once you own a home, the best way to prevent a lien is to meet your tax obligations. Pay your property taxes on time as well as your federal income taxes. If you can’t pay your taxes, contact your city or the IRS immediately and ask about payment plan options.

Resolve disputes and settle debts 

If you do get into a dispute with a contractor or other service provider, strive to resolve it before they sue you and take you to court. Try to find a way to be communicative and reach a compromise so you can avoid the stress of legal costs. 

Final thoughts

If there is a lien on your house, it’s wise to pay your debt in full as soon as possible to have it removed. If you don’t, you could lose your home. There are many different types of liens, but all of them can prevent you from selling your home or refinancing it. If you need help paying off your debt to clear your title, see if you qualify for an HEI.

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