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What are your options if the home you inherit has a lien?

On Behalf of | May 30, 2024 | Real Estate |

Among the most valuable assets a person can inherit is a home, especially in California where prices are among the highest in the country. It can also be one of the more complex assets one can inherit, particularly if it has to go through probate.

If you inherit a home from a loved one, you may get the unwelcome surprise of learning that there’s a lien on it. While mortgages are technically liens, they’re voluntary. The term “lien” is generally used for involuntary liens where a creditor has a stake in the home because the owner owes them money.

An involuntary lien could be for a lawsuit settlement, unpaid taxes or other debts. Unlike some debts, an involuntary lien doesn’t go away when the debtor dies. It’s attached to the property. If you inherit a home with a lien, you inherit the lien. Oftentimes, people forget there’s a lien on their home or they die before they can pay it off. What are your options?

Selling or keeping a home with a lien

First, it’s critical to find out how much the lien (or remaining balance on it) is. This may help determine what you do with the property. If the lien is less than the current value of the home, you can pay it off from the proceeds of the sale.

Selling a home with a lien can be a bit of a challenge, but it shouldn’t prevent the sale. If you can pay it off from your own assets, you can more easily sell the home. Of course, you may choose to pay off the lien and keep the home.

If the lien is most of the home’s value, you may opt to allow the creditor who holds the lien take the home. This can be a difficult decision if you and/or your loved one hoped to keep it in the family.

What if it wasn’t left to a specific beneficiary?

A home with an involuntary lien left to a specific beneficiary is just one scenario. A decedent may have directed that the home be sold and the proceeds returned to the estate to be divided among beneficiaries. They may have left the home to multiple heirs or had no will at all.

Regardless, if you’re the one dealing with it as the beneficiary and/or the executor, it’s critical to determine your options. A lien can extend and complicate the probate process. Getting experienced legal guidance can help you navigate it with as few complications as possible.