Can You Buy a House With a Lien? Don’t Miss Out On Your Dream Home
6 minute read
January 4, 2024


Especially for first-time homebuyers, the prospect of buying a house brings a flurry of excitement and anticipation. But it becomes daunting when you encounter a property encumbered by a lien—can you buy a house with a lien on it? 

Prospective buyers must be well-informed, though it’s equally important to note that the presence of a lien on a house shouldn’t immediately raise red flags.

A lien, in its essence, acts as a legal claim against a property for the settlement of a debt or obligation. 

This claim can significantly impact the buying process, introducing complexities that necessitate careful navigation.

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Are there options to buy a house with a lien on it?

The answer, while complex, is usually yes, with considerations and challenges that must be carefully managed. 

The process involves more than just the exchange of property; it’s about understanding the layers of legal and financial obligations entwined with the property in question.

Understanding liens and their impact on real estate transactions

A lien serves as a legal notice attached to a property’s title, indicating that the owner owes a debt that must be cleared (having a “clear title”) before the property can be sold. 

Liens can be voluntary, in cases like mortgages, or involuntary, such as a tax lien or a judgment lien resulting from unpaid debts to creditors or the government. 

Tax liens, in particular, are a common type that prospective buyers often encounter. 

They are placed on a property when the owner fails to pay taxes, indicating that the government has a legal claim to the property until the debt is satisfied.

What does it mean when a house has a lien on it?

Liens can significantly affect property titles, introducing risks and limitations for interested buyers. 

A lien can delay the sale of a property, complicate the financing process, and, if not addressed, potentially lead to foreclosure or the sale of the property at auction to satisfy the debt. 

A lien on the property means buyers need to assess the viability of this purchase and the particular complexities involved.

Buying a house with a lien on the property

The journey to purchase a property burdened by a lien involves several critical steps, but it should always begin with comprehensive research and due diligence. 

Prospective buyers must conduct a title search to uncover liens or encumbrances that might be on the property. 

This step is vital to understand the property’s legal standing and any debts that may need to be resolved.

How to purchase a property with a lien on it

If an owner fails to pay the property taxes, the government itself is the one to place a lien on the property—a tax lien

While a mortgage lien gives the lender a claim to the property until the mortgage loan is repaid, a tax lien means the government has a claim until the seller’s tax bill is paid. 

Both can be handled in roughly the same way by an interested buyer. 

Investigations needed 

Regardless of the type of lien, buyers must be prepared to investigate: 

  • The lien’s status
  • The amount owed
  • Liens with priority status

This process often involves negotiating with the lien holder to resolve the debt, either through:

  1. Payment in full by the seller before the sale or
  2. An arrangement that allows the property’s sale with the lien in place to be satisfied from the sale proceeds

The importance of the title

With any type of lien, obtaining a clear title is paramount, and the role of title insurance becomes critical in protecting buyers. 

Title insurance offers a safety net against unforeseen claims and issues that might arise after the purchase, ensuring that the buyer’s investment is protected.

Financing options for properties with liens

Securing financing for a property encumbered by a lien presents a unique set of challenges.

Almost every traditional lender will view such properties as high-risk investments, leading to stringent lending criteria or outright denial of financing. 

This is where alternative financing solutions, such as hard money loans, can become the solution. 

Unlike conventional banks, hard money lenders like Marquee Funding Group assess the value of the property and the equity involved rather than solely focusing on the borrower’s credit history or the presence of liens. 

This approach frequently offers a much-needed lifeline for buyers interested in properties with liens.

Mitigating risks when buying a property with a lien

The complexities of purchasing a property with a lien necessitate a cautious and informed approach to risk mitigation. 

Arrange a lien payoff with the seller

One effective strategy is negotiating lien payoffs, where the buyer or seller arranges to settle the outstanding debt, either in full or through a negotiated amount, to remove the lien from the property. 

Involving a real estate attorney can provide invaluable assistance, offering expert advice and ensuring that all legal procedures are correctly followed to secure a clear title.

Get a discharge

Ensuring proper lien discharge before closing is essential. 

Buyers should insist on proof of lien satisfaction, which must be officially recorded in the property’s title records. 

This step is vital to avoid any future disputes or claims against the property. 

Professional guidance plays a pivotal role in navigating these complexities successfully—from real estate agents experienced in dealing with such properties to attorneys specializing in real estate law.

What’s the verdict: Can you buy a house with a lien?

Purchasing a house with a lien, while undeniably complex, is feasible with the right resources and approach. 

By understanding the nature of liens, conducting thorough due diligence, and leveraging alternative financing options like those offered by Marquee Funding Group, buyers can navigate the challenges and secure their desired property. 

Our commitment to providing flexible, solution-oriented financing solutions underscores our commitment to being a vital resource for buyers dealing with properties with liens.

Get started with your new home

For those considering the purchase of a property with a lien, Marquee Funding Group is ready to assist. 

We encourage you to reach out for more information or to discuss your financing options. 

Get started with Marquee Funding Group, and let us help you turn the challenge of buying a house with a lien into an achievable goal.

Photo by Frames For Your Heart on Unsplash

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