Can You Sell A House with a Lien On It In Maryland? Answers You Need

Understanding Property Liens in Maryland

Selling a home is one of the most significant financial decisions most people will ever make. It can be exciting and nerve-wracking at the same time. But what happens when a lien is involved? Many Maryland homeowners are unaware of how liens can complicate a sale or even feel overwhelmed by the challenges they present.

This guide will explain everything you need to know about selling a house with a lien in Maryland, from understanding what liens are and how they impact a sale to practical strategies for resolving them. We’ll also share insider tips to help you prepare your home for sale and attract buyers—even with the complexities of a lien. By the end, you’ll feel confident and empowered to take the next step in your home-selling journey.

What Is a Lien and Why Does It Matter?

A lien is a legal claim or hold placed on a property by a creditor to ensure the repayment of a debt or obligation. When a lien is filed, it essentially ties the debt to the property, making it a financial encumbrance that must be addressed. This can happen for various reasons, such as unpaid taxes, contractor bills, or court-ordered judgments. Once a lien is placed, the property cannot typically be sold or transferred to a new owner until the lien is resolved, either through payment, negotiation, or legal action.

Why Liens Are Important in Real Estate Transactions

Liens play a crucial role in real estate transactions because they impact the property’s title—the legal document proving ownership. A “clean title,” free of liens or encumbrances, is a prerequisite for most sales, as it ensures the buyer receives the property without the risk of inheriting the previous owner’s debts.

Failing to address a lien can derail the sale, delay closing, or even lead to legal disputes. For homeowners, understanding and resolving liens early in the process is essential to ensuring a smooth and successful transaction.

Types of Liens in Maryland: A Closer Look

Liens can arise for various reasons, including unpaid taxes, contractor disputes, or court judgments. The most common types of liens Maryland homeowners face include:

1. Tax Liens

A tax lien is a serious financial claim placed on a property when the owner fails to pay property taxes, income taxes, or other government-imposed obligations. In Maryland, tax liens take priority over other debts and must be resolved before a property can be sold. If left unpaid, the government may initiate a tax sale, auctioning the property to recover the owed amount. However, many tax authorities offer options to negotiate a payment plan or allow the lien to be paid off using proceeds from the home sale, providing homeowners a chance to resolve the issue and move forward.

2. Mechanic’s Liens

A mechanic’s lien is filed by contractors, subcontractors, or suppliers who were not paid for services or materials provided for home improvements. In Maryland, these liens must be filed within 180 days of completing the work. Mechanic’s liens can complicate or delay a home sale, as buyers typically require a clear title to proceed. Homeowners often resolve these liens by negotiating a settlement with the contractor, ensuring the title is cleared before closing.

3. Judgment Liens

4. HOA or Condo Liens

Homeowners’ associations (HOAs) and condominium associations can file liens against properties for unpaid dues, fees, or fines. While HOA liens are typically subordinate to a mortgage, they must still be resolved before a property sale can close. Many associations are willing to negotiate and release the lien if the debt is paid using proceeds from the home sale, ensuring a smooth transaction for both parties.

5. Child Support Liens

A child support lien is imposed on a property when the owner has unpaid child support obligations. These liens are strictly enforced and must be resolved before the property can be sold. In some cases, payment plans or settlements can be arranged to satisfy the lien, allowing the sale to proceed without complications.

Can You Sell a House with a Lien in Maryland?

Absolutely! Having a lien on your property doesn’t mean you’re stuck with it forever. Maryland law allows homeowners to sell properties with liens, but it requires additional steps to ensure the debt tied to the property is addressed. Liens must typically be resolved or accounted for during the closing process, either by paying them off, negotiating a settlement, or using proceeds from the sale to satisfy the debt.

Selling a house with a lien in Maryland often involves working closely with a title company, a real estate attorney, and possibly negotiating with lienholders. These professionals help ensure the title is cleared and the property can legally transfer to the new owner. While liens can add complexity, they are manageable with proper preparation and guidance, allowing you to move forward with your sale confidently.

How Liens Are Resolved in a Sale

Resolving liens is an essential step in selling a property with a clean title. There are several ways homeowners can address liens during a sale to ensure the transaction proceeds smoothly:

1. Paying Off the Lien:
   The most common method is using proceeds from the sale to pay off the lien at closing. The title company facilitates this process by allocating the necessary funds to the lienholder before disbursing the remaining proceeds to the seller. This ensures the title is cleared for the buyer.
2. Negotiating a Settlement:
   In many cases, lienholders are open to negotiation, especially if they prefer to avoid lengthy legal processes. Homeowners may be able to settle the debt for less than the full amount owed. For example, a lienholder may accept a lump-sum payment that is lower than the total debt in exchange for releasing the lien.
3. Transferring the Debt:
   Although less common, some buyers may agree to take on the responsibility for the lien, particularly if they see value in the property and negotiate a lower purchase price to account for the debt. This arrangement requires clear communication and agreement between all parties, as well as approval from the buyer’s lender.

Each resolution method depends on the type of lien, the lienholder’s willingness to negotiate, and the specifics of the sale. Working with a real estate attorney or a title company is crucial to ensure the lien is properly handled, enabling a smooth and successful transaction.

Step-by-Step Guide to Selling a Home with a Lien

1. Conduct a Title Search	A title search will identify any liens or encumbrances on your property. This is a critical first step, as it provides clarity on what needs to be resolved before selling.
2. Understand the Lien	Determine the type of lien, the amount owed, and whether it is valid. Some liens may have expired or been filed incorrectly and can be contested.
3. Contact the Lienholder	Reach out to the creditor to discuss your options. Lienholders are often open to negotiation, especially if they believe foreclosure or legal action is less favorable.
4. Hire a Real Estate Attorney	Selling a home with a lien involves legal complexities that are best handled by a professional. A real estate attorney can ensure compliance with Maryland laws, negotiate with lienholders, and handle disputes.
5. Disclose the Lien to Buyers	Transparency is key to building trust with potential buyers. Disclose the lien upfront and explain your plan for resolving it.
6. Resolve the Lien Before Closing	Most liens are resolved during the closing process. The title company will ensure the lienholder is paid from the sale proceeds, clearing the title for the buyer.

How Liens Impact Home Sales

Liens can affect the home-selling process in several ways:

• Delayed Timelines: Resolving liens takes time, which may delay the closing process.
• Reduced Buyer Interest: Buyers may be hesitant to purchase a property with unresolved liens.
• Lower Sale Prices: If the buyer agrees to take on the lien, they may request a significant discount on the purchase price.

Alternative Options to Selling a Home with a Lien

If selling your home isn’t feasible, consider these alternatives:

1. Refinancing the Lien – Refinancing allows you to pay off the lien by securing a new loan or mortgage. This option works well for homeowners with sufficient equity or good credit.

2. Negotiating a Settlement – Many lienholders are open to accepting less than the full amount owed, especially if the debt is old or difficult to collect.

3. Contesting the Lien – If you believe the lien is invalid, you can challenge it in court. A real estate attorney can help you determine if this is a viable option.

Important Maryland-Specific Considerations

• Mechanic’s Liens Deadlines: Contractors must file liens within 180 days of completing work. If not enforced in court within one year, the lien may expire.
• Tax Sales: Unpaid property taxes can result in a tax sale, where the government auctions your property. Address tax liens promptly to avoid this.
• Homestead Protections: Maryland offers limited protections for primary residences against certain liens, but these do not apply to tax or HOA liens.

Conclusion

Selling a house with a lien in Maryland may seem daunting at first, but it’s entirely possible with the right approach. By understanding the nature of your lien, taking proactive steps to resolve it, and seeking professional help when needed, you can overcome obstacles and achieve a successful sale.

Remember, liens are not the end of the road—they are simply challenges to be addressed. With transparency, preparation, and support from experienced professionals, you can turn these challenges into opportunities. Whether you’re paying off a tax lien, settling with a contractor, or resolving a judgment lien, the key is to stay informed and take action early.

At 3 Step Home Sale, we specialize in helping Maryland homeowners navigate complex real estate situations. If you’re ready to sell your house with confidence, contact us today for expert advice and personalized solutions.

Frequently Asked Questions

What is a notice of lien in Maryland?

• A notice of lien is a legal claim placed on a property to secure payment for a debt. For example, if a craftsman or service provider is not fully compensated for their work within 90 days, they can enforce the lien by selling the property. Before doing so, they are required to give the property owner a minimum of 30 days’ notice.

How long does a lien stay on your property in Maryland?

• A lien on property in Maryland can last up to 20 years if the property is subject to special valuation under Section 7-211 of Maryland law, with the lien taking effect on the date the owner’s interest in the property is transferred.

Can a judgement lien be placed on jointly owned property in Maryland?

• For property held by a married couple as tenants by the entirety, a judgment against one spouse typically does not attach to the property. In cases of jointly owned property (not by spouses), a judgment lien can only attach if the creditor takes action to sever the joint tenancy by executing against the property.

How can you tell if a house has a lien in Maryland?

• To determine whether a property has a lien:

1. Search property records through Maryland Land Records (mdlandrec.net), where liens are documented alongside deeds.
2. Some liens may result from court judgments.
3. Tax delinquencies can also result in liens against the property.

Can a title company remove a lien?

• Title companies cannot directly remove liens. However, they play a crucial role in identifying liens during the title search process and may assist sellers in negotiating with lienholders to settle outstanding debts. Ultimately, the responsibility to clear the lien rests with the property owner.

What is a recorded lien in Maryland?

• A recorded lien is a public record indicating that a debt, such as unpaid taxes, is owed. This lien can impact an individual’s credit, ability to secure loans, or even retain a security clearance. It serves as formal notice that the state may claim the debtor’s assets.

Is Maryland a lien or deed state?

• Maryland operates as a lien state. If property taxes go unpaid and the amount owed reaches at least $250, the unpaid taxes become a lien on the property. This lien functions similarly to a mortgage in that it represents a debt tied to the property.