Can a House Be Sold With a Lien On It North Carolina?

Yes, you can sell a house with a lien on it in North Carolina, but it’s crucial to address the lien before completing the sale to ensure a smooth transaction. This may involve paying off the lien, negotiating with the lienholder, or holding sale proceeds in escrow. Disclosing any known liens to potential buyers and seeking legal guidance can help navigate this process effectively. Continue reading to learn more!

Table of contents

1. Can a house be sold with a lien on it North Carolina
2. Selling a house with a lien on it North Carolina
3. What is a property lien North Carolina?
4. How do property liens work North Carolina?
5. Types of property liens North Carolina
6. Can you sell a house with a lien North Carolina?
7. How to sell a house with a lien on it North Carolina
8. How do liens impact a home sale North Carolina?
9. Conclusion: Can you sell a house with a lien on it in North Carolina?

Can a house be sold with a lien on it North Carolina?

Yes, selling a property with a lien attached is possible as long as the buyer is willing to settle the lien at closing or the sale proceeds are enough to cover the lien balance prior to receiving your funds. While some buyers may be hesitant about purchasing a property with a lien on it, there are plenty of cash buyers who are willing to proceed without hesitation.

Selling a house with a lien on it North Carolina

Selling a house on the real estate market can be challenging enough, but the process becomes even more complex when the property is encumbered by a lien. Many deals have been delayed or even canceled due to this issue. Therefore, it’s essential to resolve all existing liens before proceeding with a home sale.

Prior to selling a house with a lien, it’s imperative to assess the legitimacy of the lien. If confirmed, the next step is to resolve the lien through payoff, transfer, or negotiation with the creditor. Upon settlement, obtain a lien termination before proceeding with listing the property. In situations where funds are insufficient to settle the lien, it’s possible to pay it off at closing using the proceeds from the sale. We will dive deeper into each of these steps in this article.

We understand the stress that comes with selling a house with a lien. To aid in the process, we’ve compiled a comprehensive guide on selling a house with a lien in North Carolina.

Case Study From the Author
Can a House be Sold with a Lien on it?

I have a deep understanding of buying and selling houses with liens in North Carolina. Since 2017 I have closed over 125 transactions on property involving a lien. I speak to many homeowners who are under the impression that they cannot sell their house because of an existing lien or judgment against the property. Here is a case study with Gary, who had let the city condemn his house due to insurmountable debts against the home.

When I met Gary, he was crippled with credit damage from years of unpaid debts owed to the state and city. Over time the house became uninhabitable and the city condemned the home. They had placed liens on the property for code violations as well as ongoing tax liens. Gary had given up on the home years ago and told me he “let the city have it back” because he concluded the liens were worth more than the value of the land.

We contacted the city and got a payoff on all the liens. It came to seven years of backed taxes and over nine liens from the city that needed to be paid in order for him to sell the property and clear his name from the debt – a task he thought impossible. We ended up making him an offer that paid off all his debt in full and now there’s a beautiful home sitting on the property. If you’re in a similar situation, don’t give up hope! Find a reputable home buyer who is willing to put in the extra work to see what needs done to clear the liens. We’ve helped many in this situation – hopefully this helps you too!

-Jason Hill, Freedom Choice Investments

What is a property lien North Carolina?

A property lien is a legal claim placed on a property by a creditor as security for a debt owed by the property owner. It gives the creditor the right to take possession of the property and sell it to satisfy the debt if the debtor fails to fulfill their financial obligations. Liens can be placed by various entities, including mortgage lenders, tax authorities, contractors, or judgment creditors.

How do property liens work North Carolina?

When a property owner neglects to settle an outstanding debt, the creditor may pursue repayment by filing a lien. This filing involves recording the lien in the local county recorder’s office, effectively making it a matter of public record.

In this context, the individual who initiates the lien is referred to as the lien holder, gaining a legal entitlement to a portion of the property once the lien is sanctioned. While most liens are approved by the North Carolina court, there are instances where the homeowner may voluntarily grant the lien.

For instance, if you’ve defaulted on your mortgage payments, the lender might file a lien against your property. Once approved by the court, the lender gains a claim to a portion of your North Carolina property. Failure to settle the debt could result in the lender seizing the property and selling it to recover some of their losses.

In such circumstances, the borrower or property owner won’t hold a clear title if a lien is imposed on their property. Essentially, the owner forfeits the ability to independently sell the property, requiring consent from the lien holder to proceed with a sale. Moreover, a lien can impede the subdivision of the house and hinder the owner from securing a mortgage until the lien is resolved.

Types of property liens North Carolina

Now that you have a fundamental understanding of liens and their functioning, let’s delve into the various types of liens prevalent in North Carolina. Below, we outline some of the most commonly utilized liens by creditors today.

Mortgage Lien

Mortgage liens represent the most common form of lien placed on a property. Property owners typically consent to mortgage liens during the loan’s closing process. In essence, a mortgage lien acts as a claim to a property, serving as security or collateral for a mortgage. Should the property owner default on mortgage payments, the lender retains the right to sell the owner’s house to recover the losses.

Property Tax Lien

A property tax lien is placed against a property when the owner is unable to pay real estate or property taxes. If the property owner neglects to resolve the property tax lien, the government possesses the authority to sell the house to recover unpaid property taxes, penalties, and interest. In situations where multiple liens exist, property tax liens are typically given priority over others.

IRS Lien

When property owners fail to pay their income taxes, the federal government may file an Internal Revenue Service lien, also known as an IRS lien, against their property. If the IRS liens remain unpaid, the government has the authority to foreclose on the property to settle the homeowner’s outstanding taxes.

Homeowner’s Association (HOA) Lien

The homeowner’s association lien, or HOA lien, is imposed on a property when the owner neglects to pay the fees and assessments required by the HOA. Although not as severe as tax liens, HOA liens can have significant consequences. Typically, HOAs collect fees or dues to finance security, landscaping, and maintenance, as well as to fund special assessments for community-owned property improvements. If a homeowner fails to settle these obligations, the HOA reserves the right to initiate foreclosure proceedings on the property, regardless of whether the owner’s mortgage payments are current.

Judgment Lien

A judgment lien, alternatively known as a judicial lien, is registered against a property when its owner loses a lawsuit and is unable to satisfy the judgment. Essentially, if an individual is sued, loses the court case, and cannot fulfill the judgment, the prevailing party can file a judgment lien against their assets, including real estate.

Mechanic’s Lien

A mechanic’s lien, also referred to as a construction lien, designer lien, or materialman lien, is lodged against a property when a homeowner defaults on payment to contractors for their services. Furthermore, a mechanic’s lien encompasses debts owed to designers, engineers, and architects whom the property owner engaged for their services.

Child Support and Alimony Lien

A child support or alimony lien is registered against a property when the property owner neglects to fulfill court-ordered child support payments. Despite this lien, the court may permit the owner to sell the property; however, the process of obtaining court approval is typically not expedient.

Can you sell a house with a lien North Carolina?

Yes. You can sell a property with a lien in North Carolina. However, unless it’s a mortgage lien, we recommend addressing the lien before the closing process begins to avoid delays. We understand this can be challenging for some homeowners, especially if you are in financial trouble, but in North Carolina a closing attorney will require the owner to clear the outstanding debt and satisfy all liens before closing so the buyer will receive clear title.

As long as the sales price meets or exceeds the outstanding debt owed in property liens, there may be options to have these creditors paid out of your seller proceeds at time of closing. We recommend speaking with a real estate attorney and the lien holder beforehand to learn what your options are.

In rare cases, a buyer may agree to buy a house with a lien on it. However most buyers will feel skeptical about buying a property with a lien. In the event that a buyer will close without the lien being paid off, you will have to use the proceeds from the sale to clear out the lien immediately after closing. If you include a clause in the closing agreement that allows you to do that, then the buyer can be convinced to close with an active lien.

How to sell a house with a lien on it North Carolina

To sell a North Carolina house with one or more liens, you can adhere to the procedure outlined in this section. It is advised that the steps detailed below should be addressed before advancing with the sale.

Discover existing liens

To determine if your property has a lien, you can conduct a title search. This involves examining public records to confirm the legal ownership and titles of the property. These documents, including land records, deeds, court judgments, and more, are typically accessible at the county records office.

Performing a property lien search independently can be time-consuming. Therefore, we suggest utilizing the services of a North Carolina title company, which can expedite the process for a nominal fee.

Determine the legitimacy of the lien

Occasionally, a lien placed on your property may be illegitimate or inaccurate. Therefore, it’s prudent to thoroughly assess the lien to ascertain its validity.

Seeking assistance from a North Carolina real estate attorney or advisor is advisable in such circumstances. If they discover a fraudulent lien, they can assist you in contesting the outstanding debts, relieving you of the financial burden. Additionally, any inaccuracies with the lien, such as outdated or incorrect information, can be rectified with their help.

Take care of the lien

Once you’ve verified the validity of the liens, it’s crucial to address them promptly. There are three approaches to accomplishing this: paying off the lien, transferring it to a different property, or engaging in negotiations with the creditor.

Pay off the lien

The most effective method to resolve a lien is by paying it off immediately. This is typically straightforward if the outstanding debt is minimal. However, if the debt exceeds what you can afford upfront, settling it at closing may be necessary.

Transfer the lien

In certain scenarios, it’s possible to transfer a property lien to another house or property that you own. If the transfer is approved, the property being sold will possess a clear title, and the payment of the lien can be postponed. The process of transferring liens typically requires the assistance of a real estate attorney.

Negotiate the lien with creditor

It is feasible to negotiate with the lender responsible for placing a lien on your property. Depending on mutual agreements reached, the outstanding amount may be reduced, or alternative payment arrangements, including hybrid solutions, may be offered. To facilitate successful negotiations with creditors or mortgage lenders, it is advisable to enlist the assistance of a real estate attorney.

Obtain lien satisfaction in writing

Once all liens on the property have been resolved, it’s essential to obtain valid documentation confirming the lien discharge.
This documentation typically takes the form of either a payoff letter or a lien release form provided by the creditor. Both documents attest that the property owner has settled all outstanding debts on the property, resulting in a clear title. Upon obtaining this documentation, it must be submitted to the county clerk at the records office to officially terminate the lien.

Proceed with a sale

After the lien has been settled and recorded with the county you are free to begin marketing the house for sale. You have two primary options for selling your house. You can either use real estate agent to market your house for sale or you can choose to skip the hassle of showings and home repairs by selling directly to a qualified cash home buyer who can buy the house as-is and close in as little as 7-14 days.

Alternative option: Use sales proceeds to settle the lien

If you’re facing a substantial outstanding debt, one option is to use the proceeds from selling the house if it holds sufficient equity. As previously mentioned, you can discuss with your real estate agent and the buyer about the inclusion of a clause in the closing statement, specifying that a portion of the sales proceeds will be allocated to pay off the lien.

While this approach is feasible, some buyers may perceive it as risky, particularly if the debt surpasses the property’s value. If a buyer is not comfortable with the clause, they retain the option to withdraw from the sale.

How do liens impact a home sale North Carolina?

A lien on your North Carolina home can impact its sale in various ways, as outlined below.

Selling to retail buyers can be a challenge

Having a lien on your home can pose challenges in attracting conventional retail buyers (like a prospective homeowner), leading to difficulty and prolonged efforts in selling your North Carolina property.

This challenge is exacerbated when there are multiple involuntary liens on the house. Moreover, if the outstanding debt is substantial or involves unpaid federal taxes, it may deter potential retail buyers who perceive the property as a risky investment.

Liens can attract cash buyers

It may come as a surprise, but having a lien on your house can draw the interest of specific buyers, including real estate investors, flippers, and cash buyers.

These motivated buyers often prefer negotiating directly with the owner to settle the lien and purchase the house rather than participating in auctions. This allows an investor to view the property in person before purchasing – contrary to what is found at auctions.

You may get less money

It may seem obvious, but selling a North Carolina house with liens will likely yield lower proceeds compared to a standard sale without liens. This is because a considerable amount of money must be allocated to clear the debts, reducing potential profits. Additionally, prospective buyers may be hesitant to pay a premium price for the property due to its lien status.

You can incur costs for professional services

Navigating the sale of a house with a lien can be intricate during the closing process, particularly when dealing with liens related to property taxes or IRS matters. Seeking advice from a seasoned attorney is advisable to ensure proper legal steps are taken.

It’s important to note that legal assistance for resolving tax liens and other involuntary liens comes at a cost. Real estate attorneys typically charge between $150 to $350 per hour for their services, which must be settled once all matters are resolved.

The buyer could attempt to re-negotiate

Discovering that a property is encumbered by a lien, particularly those associated with business or federal taxes, may lead potential buyers to presume financial strain and seek to renegotiate for a lower sales price.

In some cases, buyers may only propose an offer equivalent to the amount owed for the lien. It’s crucial to meticulously review your purchase agreement before finalizing the contract with a buyer.

Conclusion: Can you sell a house with a lien on it in North Carolina?

Selling your North Carolina house with liens may pose challenges, but it’s certainly feasible. By adhering to the outlined procedure, you can navigate the process smoothly without encountering significant hurdles. Additionally, it’s highly recommended to enlist the assistance of a North Carolina real estate attorney who can adeptly manage the legal aspects on your behalf.

These findings apply to all cities and towns in North Carolina, including Raleigh, Durham, Fayetteville, Johnston County, Sanford, Burlington, and surrounding areas.

Author: Jason Hill

I am a seasoned real estate agent and investor with nearly a decade of experience helping my clients navigate the intricacies of selling a house with a lien in North Carolina. As the founder of Freedom Choice Investments my mission is to deliver simple and hassle free selling solutions to North Carolina homeowners. With the ability to either list your house or buy it as-is we have a unique offering that caters to those looking for ways to sell a house with a lien attached in North Carolina.