How do you sell a house with a lien?

Written by Michael FrankeLast reviewed: November 2, 2026

You sell a house with a lien the same way as any other sale: the title search finds the lien, and it is paid from your sale proceeds at closing so the buyer gets clear title. If the liens add up to more than the sale will bring, you negotiate a payoff with each lienholder before closing. For a federal tax lien, the IRS can issue a certificate of discharge for that property; apply on Form 14135 at least 45 days before the sale.

Key facts

Liens appear on the seller's side of the closing statement and are paid before you receive anything (12 CFR 1026.38).
Federal tax lien: the IRS releases it within 30 days after the debt is paid (IRS).
Certificate of discharge: Form 14135, filed at least 45 days before the sale (IRS Publication 783).

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Common liens on a house

Lien	What it is
Mortgage or home equity line	The loan secured by the house. Paid from the sale like any lien.
Property tax lien	Unpaid property taxes. Usually paid first at closing.
Federal tax lien	The IRS claim for unpaid federal tax, which attaches to all your property, including real estate (IRS).
Mechanic's lien	Filed by a contractor or supplier who was not paid for work on the property (LII).
Judgment lien	Created by a court judgment for an unpaid debt; it ranks behind liens that already existed (LII).

How a lien gets cleared at closing

The title company or closing attorney searches county records for every recorded lien and requests a payoff letter from each holder. At closing, those amounts come off the top of the sale price and are sent to the lienholders, who then file releases. The buyer's owner's title insurance protects them against claims that were missed, such as a prior owner's unpaid taxes or an unpaid contractor (CFPB).

If you dispute a lien, settle or bond it off before closing; a title company will not insure over an open lien without a plan for it.

Selling with a federal tax lien

You do not have to pay your whole tax bill to sell. A certificate of discharge removes the federal tax lien from the specific property being sold. The IRS will discharge the property when it is paid the value of its interest in it, when its interest has no value because senior debts exceed the sale price, or when other property still subject to the lien is worth at least twice the tax plus senior debts. Apply on Form 14135 using Publication 783, at least 45 days before the sale (IRS Publication 783).

Frequently asked questions

Can you sell a house with a lien on it?

Yes. The lien is paid from the sale proceeds at closing, or settled with the lienholder beforehand if there is not enough equity.

Who pays the lien when a house is sold?

The seller, out of the sale proceeds. The closing agent sends the payoff directly to the lienholder.

What if the liens are more than the house is worth?

Each lienholder has to agree to accept less, or the sale cannot give clear title. Junior lienholders often accept a reduced payoff because a foreclosure would leave them with nothing.

Sources

Checked against each source on November 2, 2026. This page is general information, not legal or tax advice.

12 CFR 1026.38(k) (seller transactions on the Closing Disclosure) (Cornell Law School LII)
Understanding a federal tax lien (Internal Revenue Service)
Publication 783, Certificate of Discharge (Form 14135 instructions) (Internal Revenue Service)
Mechanic's lien (Cornell Law School LII Wex)
Judgment lien (Cornell Law School LII Wex)
What is owner's title insurance? (Consumer Financial Protection Bureau)