Can you sell a house with a lien on it?
Judgment, tax and contractor liens don't have to stop a sale. Here's how they usually get cleared at closing.
No obligation. No pressure. Takes about 2 minutes.
The short answer
Usually, yes. A lien is a recorded claim against the property for a debt, and the buyer's title search will turn it up. In most sales the lien is paid out of your proceeds at closing and released, so the buyer gets clear title. If the sale won't cover everything, the lienholder has to agree to take less, or for a federal tax lien, the IRS can issue a certificate of discharge.
Step by step
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1
Find out what's recorded
Liens are public records. In Virginia, a money judgment becomes a lien on the owner's real estate once it's recorded on the judgment lien docket at the circuit court clerk's office, and unpaid real estate taxes are a lien that comes ahead of any other. A title search shows what's there.
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2
Get a payoff figure for each one
Ask each creditor for a written payoff good through your expected closing date. Interest and fees can make it higher than the original debt.
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3
Let the closing pay them
At settlement, the liens are paid from the sale money along with any mortgage, and the releases get recorded. You receive what's left.
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4
Federal tax lien? Start early
The IRS can issue a certificate of discharge that removes its lien from the house being sold. You apply on Form 14135, and the IRS asks for the application at least 45 days before closing. Paying the tax debt in full also works: the IRS releases the lien within 30 days after it's paid.
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5
If the liens add up to more than the sale
Talk to the lienholders about accepting less, and bring in an attorney. The IRS discharge rules include an option for when its share of the sale is worth less than the tax owed.
Sources: IRS: Understanding a federal tax lien · IRS Publication 783: Certificate of Discharge from Federal Tax Lien · Code of Virginia § 8.01-458 (judgment liens) · Code of Virginia § 58.1-3340 (real estate tax lien)
This page explains how liens are generally handled in a sale. It isn't legal or tax advice. Talk to a real estate attorney or tax professional about the liens on your property.
Cash offer vs listing
Example: a $250,000 home
| Offer | $205,000 |
|---|---|
| Repairs | $0 |
| Commissions | $0 |
| Closing costs | $0 |
| You walk away with | $205,000 |
| In 7 to 14 days | |
| Sale price | $250,000 |
|---|---|
| Repairs | about $8,000 |
| Commissions | about $13,800 |
| Closing and holding | about $6,000 |
| You walk away with | about $222,200 |
| In 60 to 90 days | |
Example only. Your numbers depend on your home and market.
Whatever liens are on the house, we'll show you what a cash offer and a listing would each leave you after they're paid.
Frequently asked questions
Will the buyer find out about the lien?
Yes. Recorded liens show up in the title search, so it helps to know your payoff numbers before you sign a contract.
Do I have to pay the lien off before I sell?
Not beforehand. It's normally paid from the proceeds at closing, so the buyer takes the house free of it.
How far ahead should I apply for an IRS lien discharge?
The IRS asks for the application at least 45 days before the closing date so it has time to review it and send its decision.
Who are you?
We are real estate investors based in Baltimore, helping homeowners since 2016. We buy houses directly for cash. We are not a licensed real estate brokerage and do not list homes ourselves; if listing could get you more, we show you the math so you can choose.