How Liens Are Handled in a Home Sale: What Sellers Need to Know

Selling a home in Colorado comes with many considerations, and one critical factor is understanding how liens are handled during the transaction. A lien is a legal claim against your property used to secure repayment of a debt. Here’s what you need to know about liens and how to navigate them when selling your home.

What Is a Lien?

A lien is a legal right granted to a creditor over a property until a debt is repaid. Common types of liens include:

• Mortgage Liens: Created when you take out a loan to purchase the property.

• Tax Liens: Issued by the government if you fail to pay property or income taxes.

• Mechanic’s Liens: Placed by contractors or suppliers for unpaid work or materials.

• Judgment Liens: Resulting from lawsuits or court judgments against you.

How Liens Affect a Home Sale

Before a home can be sold, any existing liens must typically be resolved. Here’s how they can impact the process:

1. Title Search: During the sale, the buyer’s title company conducts a title search to identify any liens on the property. Unresolved liens can delay or even derail the transaction.

2. Liens Must Be Paid Off: Sellers are usually required to pay off liens at closing. The lien amount is deducted from the sale proceeds, ensuring the property transfers to the buyer free and clear.

3. Clouded Title: A lien creates a “cloud” on the title, meaning it cannot be transferred until the issue is resolved.

Resolving Liens Before Selling

To ensure a smooth transaction, address any liens before listing your home. Follow these steps:

1. Review Your Property Records

Obtain a copy of your title report to identify any existing liens. This report is available from the county recorder’s office or through a title company.

2. Determine the Validity of Liens

Verify whether each lien is valid and accurate. If you believe a lien is incorrect, consult with an attorney to dispute it.

3. Pay Off the Debt

Work with your lender, contractor, or creditor to settle the debt. Keep receipts or documentation proving the lien has been satisfied.

4. Request a Lien Release

Once the debt is paid, request a lien release from the creditor. This document confirms that the lien is no longer enforceable.

5. Work with a Title Company

A title company can assist in clearing liens and ensuring the title is ready for transfer.

What if You Can’t Pay Off the Lien?

If paying off a lien is financially challenging, consider these options:

• Negotiate with the Creditor: Request a settlement or payment plan.

• Short Sale: If the property value is less than the debt, a short sale may allow you to sell with the lender’s approval.

• Escrow Holdback: Funds from the sale can be held in escrow to pay off the lien.

Preventing Liens in the Future

1. Stay Current on Payments: Pay property taxes, contractor bills, and other obligations promptly.

2. Document Agreements: Keep detailed records of contracts, payments, and disputes.

3. Monitor Property Records: Periodically check for unexpected liens on your property.

How Corken + Company Can Help

At Corken + Company, we’re dedicated to helping Colorado homeowners navigate complex transactions. Our team provides:

• Title Review: Identify and address liens early in the selling process.

• Expert Guidance: Work with trusted attorneys and title companies to resolve liens.

• Seamless Transactions: Ensure your sale proceeds without delays or complications.

Resolve Liens for a Smooth Sale

Understanding how liens affect your home sale is essential to avoiding delays and ensuring a successful transaction. By addressing liens early and working with knowledgeable professionals, you can confidently move forward with your real estate goals.

Selling your Colorado home? Contact Corken + Company for expert advice and assistance in handling liens and ensuring a seamless sale. Visit our website for resources and personalized support.