Liens on your house: what happens when you sell in California
Finding out there's a lien on your property is a gut punch, but it's usually not the end of the road. A lien is a claim against the property, and in most sales, it simply gets paid from the proceeds at closing.
What a lien is
A lien is a legal claim recorded against real estate, securing a debt. While it's in place, the property can't be sold with clear title, and a title company won't close until every lien is paid or otherwise resolved. Liens follow the property, not just the person, which is why they surface when you try to sell.
The common types
- Mortgage or deed of trust: your home loan, usually the largest claim.
- Property tax liens: unpaid county taxes, which generally get paid ahead of most other claims.
- Judgment liens: when someone wins a court judgment against you and records it, it can attach to real estate you own in that county. In California, judgment liens last for a set period and can be renewed.
- Federal and state tax liens: unpaid income or payroll taxes owed to the IRS or California agencies.
- Mechanic's liens: a contractor or supplier claims they weren't paid for work on the house.
- HOA liens: unpaid assessments or fines owed to an association.
- Code enforcement liens: city or county charges tied to violations.
The liens that come up most often on Sacramento County homes are unpaid property taxes, judgment liens, and mechanic's liens. In most cases there is enough equity in the house to cover them, and the title company and escrow take care of the payoffs, so the owner doesn't have to bring money to the table.
How a title company handles them
When you open escrow, the title company searches the public records and prepares a preliminary title report listing every recorded claim. It then asks each lienholder for a payoff demand, a statement of exactly what's owed on the closing date. At closing, the payoffs are paid from the sale proceeds, and whatever remains goes to you. If the sale price covers all the liens and costs, you don't write a check.
When the liens are bigger than your equity
This is the hard case. Your options generally include:
- Negotiating a payoff. Some lienholders will accept less than the full balance, particularly when the alternative is a long wait or nothing. It isn't guaranteed, and it depends on who holds the lien.
- Bringing money to closing to cover the gap, if you can.
- Waiting for the property to build equity, though liens may keep growing with interest or penalties.
- Talking to an attorney about other protections, since some judgments and debts have rules that may affect what a creditor can do.
Steps to take now
- Find out exactly what's recorded. A title company or title officer can help you pull a report.
- List each lien, who holds it, and the current payoff.
- Compare the total to a realistic sale price, so you know what you'd net, if anything.
- Talk to a real estate attorney if the numbers are close or if you aren't sure a lien is valid. Liens are sometimes recorded in error, and some can be disputed.
If you'd like help understanding what a sale would look like with liens on your property, see how we handle it or send us the address. We'll go through the numbers with you honestly.
This article is general information, not legal advice. Lien rules vary by type and situation, so consult a California real estate attorney about yours.