Selling with liens or back taxes

A lien doesn't stop you from selling

A lien is a legal claim against your property for money you owe. Your mortgage is a lien. So is a home equity loan. But liens can also come from unpaid property taxes, court judgments, contractors who weren't paid, or government agencies. Liens attach to the house, which means they usually have to be paid or otherwise resolved before a buyer can get clear title.

The good news: in most sales, liens are simply paid off at closing from the sale proceeds, the same way a mortgage is. You don't need to come up with the money before you sell, as long as there's enough equity to cover them.

Types of liens we see on Long Island houses

• Unpaid property taxes. Long Island property taxes are high, and falling behind even a year or two can add up quickly with interest and penalties.
• Judgment liens. If someone sues you and wins a money judgment, it can become a lien on real estate you own in that county.
• Mechanic's liens. Contractors, subcontractors, or suppliers who weren't paid for work on the house can file a mechanic's lien against it.
• State and federal tax liens. Unpaid income taxes can lead to tax liens filed by New York State or the IRS.
• Municipal charges. Unpaid water bills, code enforcement charges, or other municipal fees may become liens in some cases.
• HOA or condo liens. Unpaid common charges can lead to liens on condo and HOA properties.
• Child support liens. In some cases, unpaid child support can result in a lien.

How liens are found

When you sell, the title company runs a search of public records, including county records and court judgment indexes, looking for anything recorded against the property or against you that could affect title. Everything it finds appears in the title report. Your attorney reviews the report and works with lienholders to get payoff letters, so each lien can be paid at closing.

It's always better to tell us what you know up front. Liens you know about are easy to plan for. Liens that surprise everyone at the last minute can delay closing.

Selling a house with unpaid property taxes

In Suffolk County, property taxes are collected locally by each town's tax receiver, and unpaid taxes are generally turned over to the county. Delinquent taxes collect interest and penalties. If they remain unpaid long enough, the county can take steps that may eventually lead to losing the property, after a redemption period.

The specific timelines and rules have legal detail, and they have been the subject of recent legal and legislative changes in New York. If you're behind on taxes, don't wait. Contact the Suffolk County Treasurer's office or an attorney to understand exactly where you stand.

When you sell, delinquent taxes, interest, and penalties are paid from the sale proceeds at closing. Selling before the situation escalates can protect your equity.

Houses sold for back taxes

Some homeowners worry that because they owe back taxes, the county will take the house or sell it for less than it's worth. In New York, the rules around tax foreclosure and what happens to surplus equity have changed in recent years after court decisions and new legislation. Even so, going through a tax foreclosure is almost always worse for the homeowner than selling on their own terms.

If you're facing a tax deadline, act now. A voluntary sale lets you choose the price and the timing, pays the taxes in full, and puts the remaining equity in your pocket.

Judgment liens

A judgment lien arises when a creditor sues and wins. In New York, a docketed money judgment can become a lien on real property the debtor owns in the county where it's filed. When you sell, the judgment typically needs to be paid or otherwise resolved at closing.

Sometimes judgment creditors are willing to negotiate, especially if they're getting paid immediately. Your attorney can reach out and ask for a reduced payoff. It doesn't always work, but it's worth asking.

Occasionally, a judgment shows up against someone with a similar name. If a lien doesn't belong to you, your attorney can usually handle it with a simple affidavit.

Mechanic's liens

If a contractor did work on your house and says they weren't paid, they may have filed a mechanic's lien. In New York, mechanic's liens have time limits and procedural requirements. If you dispute the lien, your attorney may be able to challenge it, or the amount can sometimes be held in escrow at closing while the dispute is resolved.

Federal and state tax liens

IRS and New York State tax liens can attach to real estate. When you sell, these are typically paid from the proceeds. If the liens exceed the equity, there are processes for requesting a release or discharge of the lien from the specific property, but these require paperwork and time. A tax professional or attorney can help.

Selling a house to pay off debt

Sometimes the house itself isn't the problem. The problem is other debt: credit cards, medical bills, personal loans, or a business that didn't work out. Selling the house can be a way to free up equity and pay everything off.

Before you make that decision, talk to an attorney or a nonprofit credit counselor. They can help you understand whether there are better options, like a debt management plan or negotiating with creditors. They can also advise on whether certain debts may be dischargeable in bankruptcy and how your home equity is treated. If selling is still the best path, a fast sale can help you stop the interest and collection calls sooner.

What if the liens add up to more than the house is worth?

If the total of the mortgage and all liens is more than the house can sell for, a regular sale won't cover everything. Options may include negotiating with lienholders to accept less, a short sale with the mortgage lender, or other legal strategies. This is where a good real estate attorney earns their fee.

How we handle houses with liens

1. Tell us about the property and any liens you're aware of.
2. We visit the house once.
3. We send a written offer, along with an estimate of payoffs and your net proceeds.
4. Your attorney reviews the contract, and title is ordered.
5. Payoff letters are collected for every lien.
6. At closing, every lien is paid from the sale, and you receive what's left.

What to gather

• Recent property tax bills or delinquency notices
• Any court papers related to judgments
• Letters from the IRS or New York State about tax liens
• Contractor invoices or lien notices
• Your most recent mortgage statement

Act sooner rather than later

Most liens grow over time through interest, penalties, and fees. Every month you wait typically means less equity at closing. If you're thinking about selling, get the numbers now, even if you're not ready to decide.

Questions people ask about liens

Can I sell my house if I have a judgment against me?

Generally yes. The judgment is usually paid from the proceeds at closing, or resolved with the creditor beforehand.

Will selling stop the collection calls?

Once the debt secured by the lien is paid, collection on that debt should stop. Other unsecured debts aren't affected unless you use your proceeds to pay them.

Can liens be removed if they're wrong?

Sometimes. If a lien was filed in error, belongs to someone else, or has expired, your attorney may be able to have it removed or insured over.

Do I need to tell you about every lien?

Please do. The title search will find them anyway, and knowing early keeps your closing on schedule.

Liens on inherited property

Heirs sometimes discover liens they knew nothing about: unpaid taxes, judgments against the deceased owner, or old mortgages that were paid but never formally satisfied. These usually get sorted out during the title process. Old satisfied mortgages can often be cleared with documentation from the lender or with title insurance. Debts of the deceased are handled through the estate. The estate's attorney will guide the process.

Old mortgages that were never satisfied

It's surprisingly common for a title search to find a mortgage that was paid off years ago but never formally satisfied on the public record, often because the lender was merged or acquired. This isn't a real debt, but it needs to be cleared. Your attorney or the title company can usually resolve it by obtaining a satisfaction from the current holder of the loan or through other procedures. It may take some time, so it's another reason to start title work early.

Water and sewer charges

Unpaid water bills can become a problem at closing, because buyers' attorneys typically require final readings and payment of outstanding charges. If you're behind on water or sewer charges, let your attorney know so they can be included in the closing figures.

Liens and your credit

Most liens appear in public records, and the underlying debts may affect your credit. Paying them off through a sale resolves the lien, though the history may remain on your credit report for a period of time. If credit repair is a concern, a nonprofit credit counselor can explain how resolving these debts will affect your score going forward.

Getting your numbers

Before deciding anything, ask your attorney or title company to run a preliminary search. Knowing exactly what liens exist gives you a clear picture of what you'd receive from a sale.

You're not the only one

Liens are far more common than most people realize. Plenty of homeowners have a judgment from an old credit card, a contractor dispute, or a year of taxes that fell behind. They're problems with solutions. The first step is simply finding out exactly what's there.

How the sale works

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