Selling a house with liens, and what gets paid at closing
How liens come off the title when a Colorado house sells, how long judgment and contractor liens last, and what your options are when the liens add up to more than the house is worth.
You can sell a house with liens on it in Colorado. The title company searches the county records, orders a payoff for each lien, and pays every one from the sale proceeds at closing so the buyer receives clear title. The hard case is when the liens total more than the price; then a lienholder has to accept less.
A lien is a payoff line, usually not a dead end.
Most sellers who reach Amy and Jenny about a lien expect to hear that the house cannot be sold until the debt is gone. That is rarely how it works. A lien is a claim against the property that gets paid out of the sale, in order, before you receive what is left.
What a lien does change is the math. A judgment from an old credit card case, a contractor who says he was never paid, unpaid HOA dues, a second mortgage you forgot was still open: each one comes off the top. If the total leaves you little or nothing, a slow listing can make it worse, because interest and fees keep running while the house sits.
We buy houses with liens across Northern Colorado and the Denver metro, as-is, as long as the numbers work for both of us. Below is how payoffs work, the Colorado rules for the two liens that surprise people most, and what to do when the numbers are tight. This is general information, not legal advice; confirm with a Colorado attorney for your situation.
The liens we see on houses we buy
- A first mortgage plus a second or a HELOC. Both are paid from the proceeds in order. We get the payoff figures early so you know your net before you sign.
- A judgment lien from a court case. A recorded judgment attaches to real estate you own in that county. It is paid at closing like any other lien, or negotiated first if it is large.
- A mechanic’s lien from a contractor. Recorded by a roofer or builder who says a bill went unpaid. Some are valid, some have lapsed, and some are worth disputing before closing.
- Past-due HOA dues and fees. The association gives the title company a payoff statement, and the balance is paid at closing.
- Delinquent property taxes. Back taxes are paid from the proceeds at closing through the county treasurer’s figures.
- A federal tax lien. The IRS has a process to release a specific property from its lien so a sale can close. It takes paperwork and lead time.
How liens are paid off when the house sells
Every sale starts with a title search. The title company pulls the county records for the property and lists everything recorded against it: mortgages, judgments, contractor liens, HOA liens, tax liens and anything else. That list becomes the commitment, and each item on it must be paid or released before the buyer will close.
For each lien, the title company requests a payoff statement good through the closing date. Those payoffs appear as lines on the settlement statement, the document that shows the price at the top and every deduction below it. At closing the title company pays each lienholder directly from the proceeds and then records the releases with the county clerk and recorder. You receive whatever remains.
You do not need the cash to clear a lien before you sell, as long as the price covers it. That is the most common misunderstanding we hear.
- Title search: every recorded lien is found and listed.
- Payoff statements: each lienholder states its exact balance to a date.
- Settlement statement: the price minus every payoff equals your net.
- Closing: the title company pays each lien and records the releases.
Judgment liens and how long they last in Colorado
A court judgment does not touch your house on its own. Under Colorado Revised Statutes 13-52-102, it becomes a lien on your real estate in a county only when the creditor records a certified transcript of the judgment there, and from that moment it attaches to property you own or later acquire in that county.
The lien expires six years after the judgment was entered, unless the creditor revives the judgment before the six years run out and records the revived judgment in the same county. A revived judgment carries a fresh six-year lien. So a judgment from eight years ago may have lapsed as a lien, or it may have been renewed. The title commitment shows which.
Look at the recording date before you assume the worst.
Judgment creditors often settle for less than the full balance when a sale is the only way they will be paid. A Colorado attorney can negotiate that, and the agreed amount is what the title company pays at closing.
Mechanic’s liens and disputed contractor bills
Colorado’s mechanic’s lien statute sets tight deadlines on the contractor. Under Colorado Revised Statutes 38-22-109, a contractor or supplier must serve a notice of intent at least ten days before recording a lien statement. The statement itself generally has to be recorded within four months after the last work or materials, or, for someone who only supplied day labor, within two months after the project was completed.
The clock does not stop there. Under 38-22-110, the lien cannot hold the property more than six months after the last work or completion unless the contractor files a lawsuit to enforce it within that time and records notice of the suit. A lien that missed those steps may no longer be enforceable, though removing it from the record can still take paperwork or a court order.
Disputed liens are common on houses we buy. A roofer walked off the job, or a subcontractor was never paid by the general contractor. A lapsed or disputed lien is a question for a Colorado attorney and the title company before closing. Either way, it can usually be resolved as part of the sale.
When the liens add up to more than the house is worth
If the payoffs total more than any buyer will pay, someone has to take less, and that requires the lienholder’s agreement. Junior lienholders such as judgment creditors and contractors will often accept a reduced payoff when the alternative is a foreclosure that leaves them nothing. A mortgage lender asked to accept less is a short sale, which needs the lender’s written approval and usually more time.
Behind on the mortgage too? Watch the calendar as well as the math. A Colorado foreclosure runs on a statutory timeline through the county public trustee, and a sale that closes before the public trustee sale stops it. Liens behind the foreclosing mortgage can be wiped out by that sale, which gives those lienholders a reason to negotiate.
Some situations call for an attorney first: a bankruptcy, a divorce decree that splits the debts, or a lien you believe was filed in error.
Those reductions get agreed before closing day.
Read more: Sell a House in Foreclosure: Close Before the Sale Date, Colorado →
Federal tax liens, HOA liens and property taxes
A federal tax lien attaches to everything you own, the house included. The IRS can issue a certificate of discharge that releases one specific property from the lien so the sale can close, and it publishes the application steps in IRS Publication 783. Start that process as soon as you have a buyer and a draft settlement statement, because the IRS reviews the numbers before it agrees.
HOA liens and delinquent property taxes are simpler. The association and the county treasurer each provide a payoff figure, and the title company pays them from the proceeds like any other line.
Listing a house that has liens or selling the house to us with the liens on it.
Listing a house that has liens
- Lien payoffs Paid at closing, after weeks or months on the market while interest and fees grow.
- Disputed liens Can stall a financed buyer’s closing until they are resolved.
- Repairs Still on you if the buyer’s lender or inspector asks.
- Your costs Commission and seller closing costs come off the top along with the liens.
Selling the house to us with the liens on it
- Lien payoffs Paid at closing on a date you choose, as little as 14 days out.
- Disputed liens We work through them with the title company and your attorney before closing.
- Repairs None. We buy as-is, with no cleanout.
- Your costs No fees or commissions, and we cover the seller’s closing costs.
What to have on hand.
- Your most recent mortgage statements, including any second mortgage or HELOC
- Any court papers, judgment notices or collection letters you have received
- The lien statement or notice of intent from any contractor
- HOA contact details and your last account statement
- Any IRS notices about a federal tax lien
How a sale with liens comes together
Tell us what is on the title
Whatever you know: the mortgage balance, any judgments, contractor bills or back dues. You do not need exact figures. The title search finds the rest.
See the offer and your estimated net
You receive a written cash offer within 24 hours of talking with us about the house. We estimate your net after the known liens so you can see what you would walk away with.
Close and let the title company pay
The title company orders payoffs, pays each lien from the proceeds and records the releases. You pick the closing date, and we cover the seller’s closing costs.
Questions homeowners ask us.
Can a lien stop you from selling your house?
Rarely on its own. A buyer will not close until every lien is paid or released, but the payoff normally comes out of the sale proceeds at closing. It becomes a real obstacle when the liens total more than the price, or when a lien is disputed and the lienholder will not sign a release.
Who pays to release a lien when a house sells?
The seller, out of the proceeds. The title company pays the lienholder the payoff amount, records the release, and the cost shows as a deduction on your settlement statement. Recording fees for releases are small; the payoff itself is the real cost.
How long does a judgment lien last in Colorado?
Six years from the date the judgment was entered, under Colorado Revised Statutes 13-52-102, unless the creditor revives the judgment before that and records it again in the same county. A revived judgment starts a new six-year lien.
How much does it cost to remove a lien from a house?
The cost is the payoff the lienholder agrees to accept, plus a small recording fee. A disputed or lapsed lien may cost attorney time instead of a payoff, and a negotiated settlement can be far less than the original balance.
Can I sell if the liens are more than the house is worth?
Only if the lienholders agree to accept less. Judgment creditors and contractors often will when a sale is the only way they get paid; a mortgage lender accepting less is a short sale and needs its written approval. An attorney can negotiate those reductions.
What if a contractor’s lien on my house is wrong?
Check the dates first. Colorado requires a notice of intent before the lien is recorded, a recording deadline, and a lawsuit within six months to keep it alive. A lien that missed those steps may be unenforceable. Have a Colorado attorney review it before closing.
Pages that usually come next.
Sell a House in Foreclosure: Close Before the Sale Date, Colorado
Foreclosure in Colorado: The Public Trustee Process, Step by Step
How Much Do Cash Buyers Pay for Houses? Our Offer Math, Shown
Quitclaim Deeds in Colorado: Uses, Risks and Recording
Get a Cash Offer for My House: What You Receive in 24 Hours
Sell My House As Is Fast: Any Condition, No Repairs, Colorado
Liens come off the top. Let us show you what is left.
Tell us what you know about the liens and the house. Within 24 hours of that conversation you will have a written cash offer and an estimate of your net, with no fees or commissions and a closing date you choose.