Here at Big State, we’ve met folks with every type of financial problem under the sun. Bankruptcy, divorce, we’ve seen it all. But one of the most common obstacles to selling one’s home is when there is a lien attached to it. So, can you sell your house if you have a lien on it? Of course. Here’s how we do it.
First, what is a lien? The purpose of a lien is to secure repayment of an obligation. When you take a loan from a lender to pay for your house, the lender files a lien against your property with the county clerk. If you do not pay back the loan, the lender can take away the house. There are liens for just about everything. Medicaid, child support, repairs. So the first thing you need to find out is: do you have a lien attached to your house, and what kind is it?
The crazy thing is, you can have a lien on your property without even knowing it. A creditor can file a lien against your home and they don’t even have to tell you, so you may not know until you begin to sell your home. If you think you may have a lien, you can perform a search on the county’s website. You can also call the county clerk regarding the existing liens. Or, you may need a professional to pull Title for you. When they pull Title they use something called title resource data. A title plant is literally an office full of people whose job it is to dig and dig and dig all day until they find title and find everything that comes up against you personally, and against your home.
Once you’ve determined what liens you have, you’ll need to determine if you qualify for a homestead exemption. Texas has a long tradition of protecting the homestead of a family or single adult from forced sale for purposes of paying debts and judgments. So if your property is your homestead, then you can probably sell your house without paying your lien, except for in these cases:
- Purchase money
- Taxes (both ad valorem and federal tax liens against both spouses)
- Owelty of partition (divorce),
- Home equity loans
- Reverse mortgages
- Liens predating the establishment of homestead
- Refinance loans
But for mostly everything else, your Homestead can protect you. Take for instance this story: We worked with a couple, and they had numerous liens against them that far exceeded the value of the home. They had a litany of troubles with their small business and they went bankrupt. But they had a homestead on their property, so we were able to make it go away. The lien still exists; the couple still owes that money, but the partial release allows them to sell the house without having to pay it.
Here’s the protocol for that process: You request the lien release, you send notice, you file on record that you’ve sent notice, and 30 days later, if they don’t send you the partial release, it’s automatically recognized as a partial release. That’s the processes we employ.
So that’s one of the many ways you’ll be protected if your property is your homestead. But what if it isn’t your homestead? How do you attain a “partial release”, or in other words, how can you get a lien partially lifted from your house so that you can complete your sale? Well, there isn’t one blueprint for going about it, but broadly speaking, the key is negotiation. This is where Big State can offer some really unique solutions that many title companies, home investment companies, and even many attorneys just can’t offer. We have two great title processors, and their job is to track down creditors and negotiate our client’s’ debt down. Here’s what to do for a few different types of liens:
- Child support liens – these are pretty easy to work with. It’s very common that the person to whom the child support payments are owed will take partial payments and settlements. All you have to do is negotiate.
- Mortgage lien – in this case, the proper course of action is to short sell your home.
- Tax loans – these you will just have to pay, there’s no getting around that.
- HOA liens – The HOA doesn’t like to negotiate, but they will if they have to.
- Weed cutting liens – these you just have to pay as well.
- Home equity loans – In this case, you need to appeal to the creditor’s bottom line. You see, only the senior mortgage holder has first lien, right? So if someone has two mortgages, or a mortgage and a home equity loan, the second loan is the junior lien holder. So if they don’t lift the lien, the house is going to go into foreclosure by the first lien holder, and the second lien will get wiped out. That means it is simply in the creditor’s best interest to negotiate on their liens if it’s delinquent. You need someone who is good at negotiating to present an organized case with your HUD statement and all your other liens. For instance, let’s say you have a $44,000 mortgage loan on your property, and a $64,000 judgement against placed against your home. We would tell the creditor with the $44,000 mortgage, “Your mortgage is a junior lien to the $64,000 judgement. So why wouldn’t you negotiate a settlement in this case, to recoup some of your losses?” We make the creditor see that it is in their best interest. This technique requires someone who can intelligently speak to the creditor, because creditors are not the friendliest people to deal with. They’re bullies. You need someone like Big State on your team to haggle them down.
- Medicaid liens – Medicaid can apply your nursing home charges against your home, meaning that if your loved one passes away they’ll apply a Medicaid lien against the estate. When the heirs sell the house, Medicaid will want to be paid something. But they do negotiate, and we negotiate with them all the time.
- IRS – The IRS is not easy to negotiate with, but they will negotiate. For instance, we had a case where our client told us she owed the US government 2 million dollars, and she was selling her house to us for $100,000. 2 million dollars! It turns out her husband had committed Medicaid fraud, and he fled the country to Bermuda, and he was a wanted criminal. The wife stayed back, so she wasn’t found guilty. But now she was stuck with a $2 million debt against a $100,000 house. So what we did was, we made an offer to the feds: if they’d be willing to do a partial release of lien on the house, we would give them all the proceeds of the sale. Now, our client wasn’t thrilled to be receiving nothing for the house, but at least she escaped any further debt. So the lesson here is, if the lien exceeds the value of the home or the sales price, then you negotiate to make a partial payment. Because why wouldn’t a creditor take something rather than nothing?
The big takeaway from these lessons is this: selling your house with a lien is possible but it isn’t always easy. Big State can make it a lot easier for you though. This isn’t a sales pitch, Big State just objectively has a suite of services that very few other firms have. Some attorneys will be able to do what we do in terms of getting your lien resolved, but you’ll end up paying them thousands of dollars with no real guarantee that they’ll be able to help you. And they won’t help you sell your house, in fact it may be months before you get the lien resolved. Other home investment firms like Big State might be able to help you sell your home fast, but it’s not likely that they’ll have the resources or the experience to resolve your lien. Therefore, Big State is in a truly unique position to help people who don’t have any other options. If you have a lien hanging on your back and you need to sell your house, it can’t hurt to consider Big State. And if that option isn’t available to you, just remember: Homestead laws are your friend, and always appeal to a creditor’s’ self interest when you negotiate down a lien.
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