Maybe you’re buying a house from a friend or relative who has a lien on their home, or maybe the home you’re eyeing is on the open market, but it’s constrained by more than just a standard mortgage loan. Which leads you to investigate: Can you buy a house with a lien on it?
The short answer: Buying a house with a lien is sometimes possible, but most lenders won’t let you close unless the lien is paid off or released at (or before) closing. In a typical sale, the title company uses the seller’s proceeds to pay valid liens and records releases so you receive the home with a clear title. It may be possible to negotiate a lower sales price on a home with a lien on it.
The biggest risk isn’t that you automatically “inherit” the seller’s debt. It’s that unresolved liens can derail financing, delay closing, or leave a cloud on the title if you buy without settling the debt.
Below, we’ll break down which liens are routine, which are red flags (tax, judgement, mechanics), and the exact steps to protect yourself.
What is a lien on a house?
A lien is a type of legal claim that entitles a person to take possession of a piece of property. When securing a mortgage, the house itself is collateral, so the lender places a lien on the house.
A lien is what gives the lender the right to foreclose on your home loan and auction the property if you stop making mortgage payments.
Anyone who has a legal interest in a property can place a lien, including creditors and the federal government. Liens are part of the public record and are recorded on the title of homes, so they can impact the sale or transfer of a home.
Generally speaking, if someone wants to sell a home with a lien, they must remove the lien before or at closing.
Buying a home with a lien on it creates additional risks and the possibility of foreclosure. So prospective buyers must do a title search to identify existing liens that could complicate the sale.
Quick explainer: Which liens are normal vs risky
Some liens are a standard part of homeownership, while others could indicate deeper issues with the ownership and even maintenance of the house. Here’s a guide to which liens are typical and which carry more risk.
| Lien type | How common? | Can you usually close? | Buyer’s move |
|---|---|---|---|
| Mortgage lien | Very common | Yes; paid at closing | Confirm payoff + release recorded |
| Property tax lien | Common | Usually, but may delay | Require payoff/release; confirm local priority rules |
| Federal tax lien | Less common | Sometimes, but can be complex | Build in extra time; confirm IRS process/discharge |
| Judgment lien | Varies | Often needs release first | Require satisfaction/release before closing |
| Mechanic’s lien | Varies | Often needs release/bond | Don’t waive title protections; require release |
| Estate recovery lien | Varies | Often needs release first | Require release; ensure clear title |
Common types of liens buyers may encounter
Below are some of the most common types of liens that homebuyers may encounter when doing title searches.
1. Mortgage lien
Lenders place mortgage liens on a house when they issue loans.
When sellers sell a home with a mortgage lien (e.g., an unpaid mortgage), they use the sale proceeds to pay the remaining amount and release the lien.
2. Judgement lien
A judgment lien is placed on a house by a court, giving a creditor the right to seize the property. Judgment liens are typically granted after a lawsuit for unsecured debts.
3. Mechanic lien
Mechanic’s liens are placed by contractors or maintenance companies for unpaid services or materials. These can create title issues that block sales.
4. Tax lien
The federal government and local governments can place a tax lien on a property if the owner owes unpaid taxes.[1] Tax liens typically take the highest priority and must typically be satisfied before the home can be sold or refinanced.
5. Estate recovery lien
Estate recovery liens are filed by Medicaid against the estate of a deceased person to recover the cost of medical services.
Generally, estate recovery liens only apply if the property owner was older than 55 when they passed away.
Can a house legally be sold with a lien on it?
Yes, it is possible to sell a home with a lien on it, but the transaction can be complicated. When you transfer a home, liens go with it, so they could become the new owner’s responsibility if steps aren't taken to settle the lien first. If a house has multiple liens on it, the owner must satisfy them in order of priority.
This is one reason why lenders typically won’t issue a loan for a home with a lien on it: the lien threatens their financial interest in the property. If the borrower stops making payments on the loan, the lender may have secondary priority below another creditor with a claim on the property.
As such, lenders usually require a clear or marketable title before issuing a loan. A clear title is one free from any encumbrances, while a marketable title has minor encumbrances.
This means sellers must resolve liens either before or after closing on a property. For example, if a home has a mortgage lien on it, the seller can use proceeds from the sale to resolve the lien.
How liens are discovered during the home-buying process
Liens are part of the public record and recorded by the county on the property’s title. This is why buyers must do a title search before they buy a house — to identify any unresolved liens.
These title searches can be performed by a title search company or a real estate attorney.
More generally, you can divide liens into known and unknown liens. Known or voluntary liens are ones that the owner explicitly consents to, usually as a condition for financing. Mortgage liens are a common type of voluntary lien.
Unknown or surprise liens may be placed without the owner’s knowledge or consent, like tax liens.
This is why you shouldn’t rely solely on the seller disclosures to identify liens. There may be liens on the house that the owner doesn’t know about.
A comprehensive title search should identify any outstanding liens so that there are no surprises late in the closing process.
How liens are typically handled in a home sale
In most cases, liens must be resolved before a home sale can proceed. There are two main ways that this can happen:
- The seller uses the proceeds from the home sale to pay off existing liens. This is the most common option with mortgage liens when the seller is selling a home with a mortgage loan.
- The seller resolves the lien before closing or before listing the property. This way, the lien doesn’t come up during the sales process.
Alternatively, the buyer can use existing liens to negotiate a lower sales price or closing credits. This can make sense if the amount owed is less than the potential savings the buyer can gain through negotiating a lower price.
For example, say the seller has a $10,000 mechanic’s lien on their property and is asking $350,000. A buyer could use the lien to negotiate a lower sales price of $330,000.
What is a lien release (and why buyers must get one)?
A lien release is an official document notifying the government that the lien is resolved. Lien holders typically file a release after a lien has been satisfied. They can issue a full lien if the amount is paid in full or a partial lien release if they reduce the amount owed.
Additionally, a lien release can be conditional — e.g., dependent on payment clearing — or unconditional. In other words, a lien release partially or fully eliminates the holder’s claim on a property.
Without a lien release, there is no proof that the lien is, in fact, cleared. This can cause major problems in buying if a property has multiple claims on it. If a buyer purchases a home with existing liens attached, they become legally responsible for satisfying those debts.
A verbal confirmation of lien release is not sufficient. A written lien release can be recorded at the local county office as objective proof that the lien no longer exists.
What if the seller can’t afford to pay off the lien?
In some cases, the sales price of a home may not be sufficient to pay off any remaining liens. When the value of the lien and remaining mortgage is more than the fair market value of the house, this is known as an equity shortfall.
For example, say an owner still owes $200,000 on their property and has a $100,000 in liens, but the house is only worth $280,000. In this case, the equity shortfall would be $20,000.
In the context of real estate, selling a house for less than the amount still owed on it is called a short sale. Lenders must approve short sales in advance, and it can take months for a short sale transaction to go through. However, a short sale hurts the seller’s credit score less than a foreclosure.
Buying a house in a short sale can be beneficial for sellers, who might be more motivated to sell, and buyers, who can potentially get a bargain price. However, the short sales are uncertain, and buyers can go months trying to close on an accepted offer only for the sale to fall through.
Risks of buying a house with a lien
These are some of the most relevant risks of buying a house with a lien on it.
- Inherit unresolved debt: The most obvious risk is that the buyer assumes the unresolved debt from the lien. The lienholder can theoretically take legal action against the new buyer.
- Delayed or failed closing: An existing lien can also cause the sale to fall through if the lender won’t provide the mortgage funds.
- Difficulty refinancing: If a buyer purchases a home with a lien on it, it can make it significantly more difficult to sell or refinance the house in the future.
- Potential foreclosure: In serious cases, the lienholder can foreclose on the property and seize it from the owner.
Additionally, liens on a home can be an indicator that the owner is in severe financial distress. Owners in financial distress may lack the funds to keep up with maintenance and repairs, so properties with liens also tend to have problems with deferred maintenance.
Should you ever buy a house with a lien?
There are two circumstances where buying a home with a lien against it can make sense:
- Any existing liens will be resolved before or at closing, and you won’t assume responsibility for them.
- You can negotiate a significant discount that is more than the amount owed in liens.
Otherwise, it usually doesn’t make sense to buy a house with liens on it. Aside from the fact that lenders usually won’t provide loans for properties with liens, a lien brings an unacceptable level of risk unless you have contingencies written into the purchase agreement to protect yourself.
As such, buyers should prioritize properties that have a clear title over others. In the worst case, an active lien can result in foreclosure and loss of the property. In the best case, buying a house with unresolved liens can make it prohibitively difficult to sell or refinance in the future.
Why working with a real estate agent and title company matters
The best option for buyers is to look for properties that have a clear title with no unresolved liens. A real estate agent and title company can perform a comprehensive title search to identify existing liens and avoid nasty surprises during closing.
A knowledgeable agent can also work out contingency arrangements that allow you to back out of a sale without penalty if liens cannot be resolved.
You can use Clever to search for expert agents and get personalized guidance from someone who's helped buyers like you find their dream homes. You may also qualify for cash back on closing!
FAQ
Should I buy a house that has a lien on it?
You shouldn’t buy a house with a lien on it unless the seller closes it before or at closing. If you buy a house and the lien isn’t resolved, you can become responsible for paying the debt.
Can a house be sold with a lien still attached?
A house can be sold with a lien still attached, but it must be resolved if the buyer wants to have a clear title. The seller can negotiate a partial lien release or use funds in escrow to cover the payments.
How much does it cost to remove a lien?
The cost of removing a lien is equal to the remaining amount of debt, plus any administrative fees for filing and recording. Additional costs may include attorney fees if resolving the lien requires litigation.
What happens if a lien isn’t discovered until after closing?
If a lien isn’t discovered until after the closing, the buyer typically assumes responsibility for it. The lienholder can seize the property if the debt isn’t cleared.
Can someone put a lien on my house without me knowing?
Yes, individuals and organizations can place a lien on your house without notifying you. As such, liens may not be discovered until someone tries to sell the house.