What is a House Lien? | Can You Sell a House in Dearborn MI With a Lien?

Selling a house is a difficult undertaking under normal circumstances, even when the process is going on well. 

If you are looking to sell your home in Dearborn, a lien on your property may only add to the stress. However, this does not imply that your situation is hopeless, and therefore, you cannot sell your house. If you seek help from the relevant authorities, you can still sell your property with a lien on it. 

The task can be complicated, and you risk losing money somewhere down the road. However, take a deep breath and learn more about liens and the process of selling your house in Dearborn under these circumstances.

Lien: What is it?

A lien is a legal claim that someone else puts against a property. This legal claim allows an individual or an organization to receive assets or file a lawsuit against you to cover any unpaid debts. 

A lien is usually a public record attached to your property that prospective creditors can see and factor in their decision to give loans. For example, your creditor may demand more than what you agreed on to pay the loan used to buy the property. 

Your creditor could file records to become a lienholder on your property, securing the loan and guaranteeing that if you do not pay back the money through payments, they have a way to get reimbursed. 

The Different Types of Lienholders

A lien can allow an organization or a person the right to your house. 

It is usually contained in the contract when you buy a property (that can be a house or a different possession). It can also spring from legal action depending on unsettled debts. 

The different kinds of liens an individual can encounter include:

Home Owners’ Association (HOA) Lien: If you have any unresolved debts or have gone against rules that necessitate financial restitution, your homeowners’ association can hold a lien against your asset.

Maybe you felled trees you were not permitted to, or you made alterations to the property that changed its value. Breaking any of the HOA rules could be enough to warrant a lien. 

Home Loan: When you purchase a house through a moneylender, the asset itself becomes security for the loan contract. As part of your agreement, the creditor usually has the authority to foreclose on the house if you do not make payments reliably or because of other circumstances such as failing to meet residency necessities or lacking proper insurance.

Internal Revenue Service (IRS) Lien: The IRS lien has the worst implications. If the IRS puts a lien on your house, it is usually stressful and time-consuming to resolve it. An IRS lien comes when you fail to pay federal taxes.

To settle this, you will certainly need to bring in accounting and legal experts to come up with ways to deal with matters immediately. 

Judgment Lien: If a moneylender sues you, demands financial payment, and wins, the lender will try to collect his dues from you or hold a lien against your home or any asset you possess. 

This way, you can pay the lender one way or another. 

Department of Revenue Lien: Do you pay taxes to the state? If not, a state official may serve you with a Department of Revenue lien. 

Occasionally, you can agree with the department to make regular payments in place of the lien. You can also transfer the lien to an asset that you own. You will need to work with a CPA and an attorney in this type of lien.

Materialman Lien: If you hired a contractor to work on your Dearborn property, you need to pay them for that task. If you fail to pay, the contractor can file a materialman lien against your property.

A subcontractor who is yet to receive payment from the contractor for working on your property can also place this lien to get compensation. This type of lien is generally easy to settle and move on. However, you can negotiate to add the lien into the sale price when selling your property.

Throw Out the Lien If You Can

Yes, it is possible to sell your property with a lien on it, but dealing with the lien before selling is always advantageous. 

Chances that a buyer will want to own a property with a lien on it are low. And even if someone buys the property, the buyer will perhaps want substantial negotiations before taking over possession. 

If you have the money to settle the lien, go ahead and do it. However, if you cannot, you can work with the lienholder to resolve the issue – the lienholder may decide to discard the lien if you pay a fraction of the debt. Or try to convince the buyer to take up the lien.

If You Cannot, 

Sell the House As-Is

Taking care of liens is usually a drawback for sellers. The undertaking can be stressful, complicated, and you may not find much incentive or profit from selling your house. The process usually involves lots of negotiation and attracts bulky accounting and legal costs. If you realize that selling your property on the open market is a lot of hassle and stress concerning liens, decide to sell it as-is to a buyer or a real estate investor such as REIOutpost LLC.

Real estate investors often buy houses even if they come with foreclosure notices or liens and then take full responsibility for the property. They negotiate a fair deal with the seller, and the transfer process ends in a matter of days. You will get to live your life with money in your account and leave the bad memory of unpaid liens behind.

Use Sale for Repayment

If you cannot get rid of the lien and you do not have the funds to settle it, you can go ahead with selling your house, understanding that liens will not prevent you from doing so but will use up your profits. 

If you have $150,000 debt on your home loan and sell your property for $250,000, that would generate you $100,000 in profit (minus the closing costs). But, if there was a $30,000 lien on the property when you sold it, you may have to settle the lien. This transaction will leave you with $70,000 in proceeds before closing costs

That said if the profit cannot cover the unsettled lien, you might not see any returns from the sale.