A guide to selling a home with a lien

Written by Samantha SheltonNMLS 1647301Updated October 2026

This article is general information about liens and title clearance, not legal, financial, or tax advice. Lien priority and release requirements vary by state and by the facts of each title. Consult a Michigan real estate attorney and your title company about your property.

You can sell a home with a lien on it. What you cannot do is hand the buyer clear title while the lien is still attached, which is why almost every lien is paid or released at the closing table instead of before you list. Most come straight out of your proceeds through escrow. The ones that collapse deals carry statutory clocks, like the federal tax lien discharge the IRS asks you to apply for at least 45 days before your closing date. The clocks are the hard part: Michigan gives your mortgage holder 60 days after the loan is satisfied to record the discharge, and the IRS wants a federal tax lien discharge application at least 45 days before your closing date.

Liens come in two families. Voluntary liens are ones you signed for, like your mortgage or a home equity line. Involuntary liens are filed against you: delinquent property taxes, an IRS lien, a collection judgment, an unpaid contractor’s construction lien, or association assessments. Your equity decides whether clearing them is paperwork or a negotiation.

Learn how selling a home with a lien works, which liens attach to a house, how to clear one before closing, and which Michigan deadlines change your timeline. If you’re earlier in the process, start with our Selling a Home guide.

Key takeaways:

• A lien blocks clear title, not the sale: Payoff and release are separate events, and Michigan gives your mortgage holder 60 days after the loan is satisfied to record the discharge.
• Order the title search before you list: A Michigan contractor can record a construction lien up to 90 days after its last day of work, so a claim can appear while you’re already under contract.
• Lead time decides the outcome: The IRS wants a discharge application at least 45 days before closing and releases a paid federal tax lien within 30 days of payment. Both windows have to fit your timeline.

What is a lien, and why does it stop a closing?

A lien is a recorded legal claim against your property that secures a debt, and it stops a closing because it travels with the real estate rather than with you. The buyer’s lender won’t fund and the title insurer won’t insure while a stranger holds a recorded claim on the collateral.

Two words do the work. Attachment means the claim is fastened to the parcel. Priority means the order claims get paid when there isn’t enough for everyone.

A conveyance in real estate transfers only what the seller owns. Sell with three recorded claims outstanding and you’ve conveyed a house with three creditors attached, which is why closings don’t happen until each claim is satisfied, released, discharged, or bonded off. Liens don’t quietly become the buyer’s problem.

Which liens show up on a home you’re selling?

Seven types account for nearly everything a residential title commitment turns up, and only two are ones you agreed to on purpose.

Four deserve a seller’s specific attention.

• Second mortgages and credit lines: A HELOC isn’t closed by paying it to zero, it’s closed by a written termination request. See selling a home with a home equity loan for the second-lien sequence.
• Construction liens: These come from remodels and roofs where someone in the chain went unpaid, including subcontractors you never hired.
• Judgment liens: A collection judgment can attach to the house without you ever being served at that address, and they surface constantly in divorce files. Selling a home during a divorce covers the related trap: a decree doesn’t remove anyone from a mortgage note, only a refinance or a release of liability does.
• Estate-related claims: When the owner died, medical liens, unpaid taxes and estate recovery claims can be pending at once. Selling a home in probate covers who can clear them.

Can you sell a home with a lien on it?

Yes, and it happens on ordinary closings every week. The lien doesn’t have to be gone before you list; it has to be gone before the deed records. Between those moments sits the title commitment, which lists every recorded claim as an exception the closing must resolve.

The sequence runs the same way each time. The title company issues the commitment, each exception gets a payoff figure or a release, the settlement statement itemizes every payoff on the seller’s side, escrow disburses, and the lienholders record their releases. That’s the clearance work in our overview of the home closing process, with more line items.

What makes a buyer comfortable is the policy behind it. The American Land Title Association exists around this exact problem, and an owner’s title insurance policy protects a buyer if a claim nobody caught surfaces later. Buyers don’t walk away from liens. They walk away from liens with no payoff figure and no plan.

How do you clear a lien before closing?

In four steps, and the first happens before your home is ever photographed.

1. Order a preliminary title report before you list

Everything downstream depends on knowing what’s recorded, and a title search costs a fraction of what a collapsed deal costs. Ordering early turns a discovery into a project plan: you learn the lien types, amounts and priority while you still control the calendar. Finding a $19,000 judgment during the inspection period, with the appraisal ordered and a rate lock running, is how a solvable problem becomes a dead file. Our guide to choosing a title company covers what to ask.

2. Verify the claim and get every payoff in writing

Never work from a remembered balance. Request a written payoff statement from each lienholder naming the amount, the good-through date, the wire instructions and the release it will record. Payoff statements expire, interest accrues daily, and a stale figure is the most common reason a closing slips a week.

3. Choose a resolution path for each lien

• Pay in full from proceeds, when the equity is there: The default and the fastest path. Michigan requires the mortgage holder to prepare, record and pay for the discharge within 60 days after the mortgage is satisfied, and the IRS releases a paid federal tax lien within 30 days of payment.
• Negotiate a reduced payoff, when the liens exceed the equity: A junior lienholder’s alternative is often nothing, which is why discounts get accepted. Timeline: 2 to 8 weeks. Get it in writing before you commit to a closing date, and have it say whether the remaining balance is forgiven or still collectible.
• Dispute an invalid lien, when the claim is wrong or defectively filed: Demand documentation, then check the procedural record, because construction liens die on deadlines and service defects. Timeline: weeks for a clerical fix, months if a court has to act. Attorney territory from the first phone call.¹
• Bond over the lien, when a contested claim would hold closing hostage: Michigan’s Construction Lien Act lets a claim of lien be vacated by filing a bond with the county clerk in the penal sum of twice the amount claimed, moving the fight off the title so the sale can close.

4. Confirm the release actually recorded

A paid lien and a released lien are different facts, and only one is visible to the next title searcher. Ask your title company to confirm each release recorded, and keep copies. This is the step that resurfaces years later on a refinance.

What if the liens exceed your equity?

Then you have four moves, and three require somebody else to agree, which is why you start them early rather than in closing week.

• Negotiate reduced payoffs: Work junior to senior. The last-recorded creditor has the weakest position and the most reason to discount.
• Bring cash to closing: The simplest fix when the shortfall is small. Model it against your seller’s closing costs so you budget the real gap, not the lien balance alone.
• Pursue a short sale: The mortgage holder approves a sale for less than the balance owed. It’s slower, and releasing the lien isn’t the same as releasing the debt unless the approval says so in writing. Our comparison of short sales and foreclosures shows the other side of the table.
• Sell to an investor: A cash buyer can close fast and will often take on a messy title, and will price that convenience aggressively. Treat those offers as a floor, not a benchmark.

One Michigan rule changes this math in the seller’s favor. Under the state’s judgment lien statute, when property subject to a judgment lien is sold or refinanced, the proceeds due to the judgment creditor are limited to the debtor’s equity at the time of sale after all senior liens, property taxes and the costs and fees necessary to close are paid. There is also no right to foreclose a judgment lien in Michigan. Have counsel calculate what the creditor is entitled to before you treat the number on the notice as the number you owe.

Selling in current condition is a separate decision from selling with a cloudy title. If you’re weighing both, our breakdown of the pros and cons of selling as-is is the companion read. “As-is” governs repairs, not honesty: it doesn’t waive Michigan’s statutory duty to disclose known defects.

How does a lien change your net proceeds and your next purchase?

It changes the only number that matters, which is what lands in your account after everything comes off the top. Price is a headline. Net is the down payment on wherever you’re going next.

Say you sell a Waterford home for $320,000. Commission, transfer taxes, title work and prorations run roughly $25,000, leaving about $295,000. Against that sit a $210,000 first mortgage, a $28,000 home equity line, $4,200 in delinquent property taxes and a $16,000 judgment lien, or $258,200 in payoffs. You net about $36,800, and the judgment is paid in full because equity remains after the senior claims, taxes and closing costs.²

Two details catch sellers repeatedly. Forbearance is not forgiveness: if you paused payments, the full balance plus any deferred amount is owed at closing, and the payoff statement is the number that counts. And commission is negotiable. Since August 17, 2024, offers of buyer-agent compensation can’t be communicated through a multiple listing service and buyer agents must have written agreements with their clients, so put every compensation term in writing. Our overview of the finances of selling walks the full worksheet.

Here’s where a mortgage broker helps, and where we’ll be plain about our lane. Align Lending is not your listing brokerage and not your law firm. We work the financing side: modeling what your net qualifies you for on the next purchase, and pricing bridge financing when two closings won’t line up. For the lien itself, work with a Michigan real estate attorney and your title company.

What Michigan sellers should know about liens

Michigan sets its lien deadlines by statute, and four of them decide how much runway a seller has.

• Construction liens run a 90-day clock, and priority reaches backward: The right to a construction lien ceases to exist unless a claim of lien is recorded within 90 days after the claimant’s last furnishing of labor or material, and the claimant must serve a copy on the owner or designee within 15 days of recording. Subcontractors and suppliers owe a notice of furnishing within 20 days after first furnishing. The lien arises at the first actual physical improvement, so it can outrank interests recorded after work started, and foreclosure can’t be brought later than 1 year after recording.
• Delinquent property taxes run a 3-year cycle: Michigan Treasury describes real property tax delinquency as a three-year forfeiture and foreclosure process. Parcels are forfeited to the county treasurer in the second year of delinquency, and taxes still unpaid as of March 31 in the third year are foreclosed. After a foreclosure judgment, redemption rights run to the March 31 immediately following the judgment, or 21 days after the judgment in a contested case, and title then vests in the foreclosing governmental unit. Taxes become a lien on December 1 and continue until paid.
• Condominium assessments sit unusually high: Under the Condominium Act, unpaid assessments plus interest, late charges, association advances, attorney fees and fines are a lien ranking ahead of everything except tax liens and sums unpaid on a first mortgage of record, and foreclosure can’t start without a recorded notice of lien served on the co-owner at least 10 days beforehand. In a non-condominium subdivision the association’s claim usually comes from the recorded declaration instead.
• Judgment liens expire: A Michigan judgment lien expires 5 years after recording and may be rerecorded only once, by recording a second certified notice at least 120 days before expiration. It doesn’t attach to property held as tenants by the entirety unless the judgment was entered against both spouses.

County practice varies more than the statute does, and recording times differ across Oakland, Wayne and Macomb. More scenarios like this live in our Selling Situations guide.

How often does the IRS file tax liens, and how does a discharge work in numbers?

The IRS filed 214,099 notices of federal tax lien in fiscal year 2025, up from 196,996 in fiscal year 2024, according to Table 4-1 of the IRS Data Book, which counts the lien requests entered into the IRS Automated Lien System. The IRS collections statistics page, last reviewed June 5, 2026, reports that taxpayers proposed 38,797 offers in compromise in fiscal year 2025 and the IRS accepted 5,464 of them, worth $98.1 million.

When the sale price cannot pay the lien in full, IRS Publication 783 lays out the discharge sections a seller chooses from on the application. Under section 6325(b)(2)(A), the IRS accepts a payment of at least the value of its interest in the property and releases the house, while the rest of the tax debt stays with the taxpayer. The publication’s own worked example runs like this:

Source: Internal Revenue Service, Publication 783 (Rev. 12-2022), example under section 6325(b)(2)(A). Hypothetical example, not an offer.

Two other paths in the same publication matter to sellers. Section 6325(b)(1) fits a seller who owns other property: the property left under the lien must be worth at least twice the tax plus the debts recorded ahead of it, so in the IRS example a $15,500 liability plus $23,334 of other debts is $38,834, and the remaining property must be worth at least $77,668. Section 6325(b)(2)(B) applies when the government’s interest in the house has no value, the case where senior liens and costs take the whole price. All three come from 26 U.S.C. 6325.

What does a delinquent Michigan property tax bill cost by closing day?

More every month. Per the Michigan Department of Treasury’s forfeiture and foreclosure process page, unpaid taxes are returned as delinquent on March 1 with a 4% administration fee and interest of 1% per month, non-compounded. A $15.00 fee is added on October 1, and at forfeiture the next March 1 a $175.00 fee is added along with additional interest of 0.5% per month from the forfeiture date.

Hypothetical example, not an offer: on the $4,200 of delinquent taxes in the net proceeds example above, Treasury’s 4% fee is $168 and each month of 1% interest adds $42, so five months of interest brings the payoff to about $4,578. If the parcel reaches forfeiture, Macomb County’s published timeline adds a minimum $175 title search fee and raises interest to 1.5% per month back to the date of delinquency, which is $63 a month on the same $4,200.

Source: Macomb County Treasurer, forfeiture and foreclosure timeline for 2025 delinquent taxes. Check your own county treasurer’s dates.

A buyer’s lender has its own reason to insist on a clean tax record. Fannie Mae’s Selling Guide topic B7-2-05, dated October 7, 2026, says Fannie Mae will not purchase or securitize a loan secured by property that has an unacceptable title impediment, “particularly unpaid real estate taxes.” A lender planning to sell the buyer’s loan to Fannie Mae therefore needs those taxes cleared at or before closing. See when a seller gets money after closing.

How does a Michigan judgment lien grow while you wait to sell?

Through interest that resets twice a year. Michigan Treasury’s page on interest rates for money judgments quotes MCL 600.6013: for most civil judgments, interest equals 1% plus the average rate paid at auctions of 5-year U.S. Treasury notes during the prior six months, as certified by the state treasurer, compounded annually. In the notice dated July 9, 2026, the treasurer certified a 3.959% average for the six months before July 1, 2026.

Source: Michigan Department of Treasury, Interest Rates for Money Judgments (certification of July 9, 2026). The right column adds the 1% that MCL 600.6013(6) sets; subsection (5) of that section provides exceptions.

Hypothetical example, not an offer: the $16,000 judgment in the net proceeds example above would add about $793 in a year if 4.959% held for both halves of that year. SCAO Form MC 94 (Rev. 3/23), the notice of judgment lien recorded with the register of deeds, states the balance due when it was recorded, the date the judgment was entered and the date it expires, so ask the creditor for a written payoff good through your closing date.

Priority is the other half. Under MCL 600.2807(2), a recorded judgment lien outranks liens recorded after it, with exceptions: purchase money mortgages and refinancing of that debt, advances under an earlier future-advance mortgage, liens with priority by law, construction lien claims, condominium or homeowners’ association assessment liens arising from recorded restrictions, and state or federal tax liens. So a later association, construction or tax lien can still come first. The CFPB describes a home equity line as a second mortgage, paid off second when a home is sold to pay the debts.

Samantha Shelton, Align Lending’s broker owner, starts these conversations the same way: “First, don’t panic. And don’t start doing random things you read online. Let’s look at the actual situation.” On a lien, that means the recorded notice, the written payoff and the statute that sets the order.

FAQ: Selling a home with a lien

Here are answers to common questions about selling a home with a lien.

Can I sell my house if there’s a lien on it?

Yes. Liens are routinely paid off at closing from the sale proceeds, the same way your mortgage is. The sale only breaks down when total liens exceed your equity and you can’t cover the shortfall. Get a preliminary title report before listing so you know every recorded claim, its amount and its priority. Surprises found under contract cost you far more leverage than surprises found early, and a responsive closing attorney is worth a lot here.

What happens if the liens are worth more than my home?

You have four realistic paths: negotiate reduced payoffs, bring cash to closing, pursue a short sale with the mortgage holder’s approval, or sell to an investor who takes the title problem on. Junior lienholders frequently accept discounts because their alternative is often nothing. Involve a real estate attorney early, since negotiated releases need to be in writing first. Our look at distressed properties shows how investors price these files.

How do I remove a lien I don’t think is valid?

Demand documentation from the claimant, then check whether the lien was recorded within the statutory deadline and properly served, since procedural defects invalidate many construction liens. If it’s a clerical error, dispute it with the filing party and the register of deeds. If it’s genuinely contested, an attorney can bring an action to discharge or quiet title, or the claim can be bonded over so closing proceeds. An independent appraisal helps when the real argument is about value.

Do I have to tell buyers about a lien on the property?

Yes, disclose it and your plan to clear it. Liens are public record and will appear in the title search regardless, so transparency preserves the deal rather than endangering it. Buyers walk away from surprises, not from problems with a documented fix. Michigan’s statutory seller’s disclosure form also asks whether you know of outstanding municipal assessments or fees and any pending litigation affecting your right to convey.

How long does a judgment last in Michigan?

Most Michigan judgments expire 10 years after they are issued, and a small claims judgment expires after six years, according to Michigan Legal Help, which adds that a creditor can renew a judgment by motion before it expires. The recorded lien cannot outlive the judgment: under section 2809 of the Revised Judicature Act, a lien ends on the day the underlying judgment expires if that comes first.

Does bankruptcy remove a lien on my house?

Usually not. The federal courts’ Chapter 7 overview says a bankruptcy discharge does not extinguish a lien on property. Michigan makes an exception for judgment liens: one is extinguished when a copy of the debtor’s discharge and the schedule listing that judgment debt are recorded with the register of deeds, unless an order finding the debt nondischargeable is recorded. Our guide to refinancing after bankruptcy covers the loan side.

How do I get a payoff amount for a federal tax lien?

Publication 783 lists three routes: call 1-800-913-6050, visit the nearest Taxpayer Assistance Center, or contact the revenue officer assigned to your case. Get the figure in writing and share it with your title company so the closing disbursement matches it. If the proceeds will fall short of the full balance, the discharge application described above is a separate track with its own lead time.

How long does a lender have to send a payoff statement?

Seven business days after a written request, under the federal rule at 12 CFR 1026.36(c)(3), and the rule covers home equity lines secured by a dwelling as well as mortgages. The request can come from you or someone acting for you, such as your title company. The deadline becomes a reasonable time when the loan is in bankruptcy or foreclosure, is a reverse mortgage, or after a natural disaster.

What does it cost to record a lien release in Michigan?

The Oakland County Register of Deeds charges $30.00 to record a document, which includes the $4.00 state survey and remonumentation fee, plus $3 for each additional liber and page a release references. Copies run $1.00 a page and a certified copy $5.00. For a paid-off mortgage, Michigan law puts the discharge and its recording fee on the mortgage holder.

Can a condo association foreclose for unpaid dues in Michigan?

Yes. Under MCL 559.208, the association can foreclose its assessment lien by court action or by advertisement, the same ways a mortgage is foreclosed, and recover reasonable interest, costs and attorney fees where the condominium documents allow. The redemption period after the sale is 6 months unless the unit is abandoned. Past-due assessments in a recorded notice of lien also outrank a first mortgage recorded after that notice. See navigating HOA regulations.

The bottom line on selling a home with a lien

Selling a home with a lien is an ordinary transaction with one extra job: delivering clear title. Order the title search before you list, get every payoff in writing, pick a resolution path for each claim, and confirm the releases recorded. Build the statutory windows into your calendar, because the IRS wants a discharge application at least 45 days before closing, a Michigan contractor has 90 days after its last work to record a construction lien, and your mortgage holder has 60 days after payoff to record the discharge. A lien doesn’t stop a sale. Finding one three days before closing does.

If you’re ready to plan what the proceeds actually buy, whether that’s your next home or bridge financing between two closings, talk to Align Lending. We’ll shop your scenario across our lender network and show you the numbers side by side. Call 248-506-5727 or start online. For the lien itself, work with a Michigan real estate attorney, and Nolo’s legal encyclopedia on selling a house is a reasonable orientation before that first meeting.

Footnotes:

1. This article is general information about lien clearance, not legal advice. Whether a lien is valid, whether it was timely recorded and properly served, and what remedy applies depend on the statute involved and the facts of your title. Consult a Michigan real estate attorney before disputing, bonding over, or ignoring any recorded claim. Return to text.

2. Example figures are hypothetical and for educational purposes only. They are not an advertisement of credit terms, a rate quote, or an estimate of your closing costs, and they do not reflect any particular transaction. Your actual payoffs, selling costs and net proceeds depend on your property, your lienholders and market conditions. Return to text.

Sources: instruction to submit an application for a certificate of discharge at least 45 days before the transaction date, and Form 14135, Application for Certificate of Discharge of Property From Federal Tax Lien, Internal Revenue Service Publication 783 (Rev. 12-2022). Release of a federal tax lien within 30 days after the liability is fully paid or becomes legally unenforceable, Internal Revenue Code § 6325(a); Internal Revenue Service, “Understanding a federal tax lien.” Construction lien 90-day recording deadline and 15-day service of the recorded claim of lien, MCL 570.1111; 20-day notice of furnishing by subcontractors and suppliers, MCL 570.1109; discharge of a claim of lien by bond in the penal sum of twice the amount claimed, filed with the county clerk, MCL 570.1116; one-year deadline to commence foreclosure, MCL 570.1117; priority arising at the time of the first actual physical improvement and over interests recorded after the lien arises, MCL 570.1119; Michigan Construction Lien Act, 1980 PA 497, MCL 570.1101 et seq. Preparation, recording and payment of the recording fee for a mortgage discharge by the mortgagee, MCL 565.41; applicable 60-day period and $1,000.00 damages plus actual damages for refusal or neglect to discharge, MCL 565.44. Judgment lien proceeds limited to the debtor’s equity after senior liens, property taxes, and costs and fees necessary to close a sale or refinancing, MCL 600.2807(3); no attachment to property held as tenants by the entirety unless the judgment is against both spouses, MCL 600.2807(1); five-year expiration and single rerecording at least 120 days before the initial expiration date, MCL 600.2809; no right to foreclose a judgment lien, and payment due at conveyance, sale under an executory contract, or refinancing, MCL 600.2819. Real property tax lien attaching December 1, or on the date provided by a city or village charter, and continuing until paid, MCL 211.40. Three-year forfeiture and foreclosure process, forfeiture to the county treasurer in the second year of delinquency, foreclosure of taxes unpaid as of March 31 in the third year, Michigan Department of Treasury, “Property Tax Forfeiture and Foreclosure”; expiration of redemption rights on the March 31 immediately succeeding entry of a foreclosure judgment, or 21 days after entry of judgment in a contested case, and vesting of fee simple title in the foreclosing governmental unit, MCL 211.78k(5); General Property Tax Act, 1893 PA 206, MCL 211.78 et seq. Condominium assessment lien priority behind only tax liens and sums unpaid on a first mortgage of record, and the recorded notice of lien served at least 10 days before commencing foreclosure, MCL 559.208. Michigan Seller Disclosure Act and the statutory disclosure form, including the questions on outstanding municipal assessments or fees and pending litigation affecting the property or the seller’s right to convey, MCL 565.951 et seq. and MCL 565.957. Owner’s title insurance and the sources of claims against title, American Land Title Association. Prohibition on communicating offers of compensation through a multiple listing service and the written buyer agreement requirement effective August 17, 2024, National Association of REALTORS®.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Lien law, priority rules, statutory deadlines and recording requirements change and vary by state, by county and by the facts of each title; confirm your figures and your options with your title company, a Michigan real estate attorney and a qualified tax professional. Figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

Related resources

20-minute read

Downsizing your home: tips for a smooth transition

Learn how to downsize your home without the chaos, with a decluttering timeline, a moving budget, tax rules on your gain and help with the emotional part.

Read more

20-minute read

Selling a home with a home equity loan or HELOC

See how selling a home with a home equity loan works, the order liens get paid at closing, prepayment and early-closure fees, and what you net afterward.

Read more

20-minute read

How to sell a home with a reverse mortgage

Learn how selling a home with a reverse mortgage works: the payoff steps, non-recourse protection and the timelines heirs get after a borrower dies.

Read more