Types of Liens in Real Estate: A First-Time Homebuyer’s Guide

What Is a Lien in Real Estate?

By Julie Marion, The First Time Home Buyer Workshop

The technical definition:
👉 A lien is an encumbrance upon property for payment of a debt.

But let’s break that down:
A lien is a legal right or interest that a creditor has in another person’s property—typically as security for a debt or obligation. If a lien is placed on your property, you cannot sell or transfer it until the debt is satisfied.

In short: your property becomes collateral until you pay what’s owed. 

The Four Major Types of Real Estate Liens

1. Mortgage Lien

• When you take out a mortgage, the lender places a lien on your home.

• This gives them the right to foreclose if you don’t repay.

• You’ll sign this as part of your mortgage note—there’s no avoiding it.

• ✅ But it’s not a bad thing—it’s simply how you can buy without paying cash.

2. Mechanic’s Lien

• If you hire a contractor, builder, or tradesperson, and you don’t pay them, they can file a mechanic’s lien.

• This ensures they eventually get paid for their labor or materials.

• 💡 Pro Tip: Always get renovation agreements in writing. It saves you from headaches and liens.

3. Tax Lien

• If you fail to pay property taxes, the government can place a lien on your home.

• This gives them the right to seize your property or sell it at a tax sale.

• If you still owe on your mortgage, your lender will usually step in before the government acts—since they don’t want to lose their collateral.

• ⚠️ But if your house is paid off, you need to be extra diligent with taxes.

4. Judgment Lien

• If you lose a lawsuit and owe money, the winning party can file a judgment lien.

• This attaches the debt to your property until satisfied.

• 🛡️ Some states have homestead exemptions that protect part of your property’s value from creditors (dollar amounts vary).

Municipal Liens (Bonus Category)

Beyond the big four, there’s also a fifth group: municipal liens. These come from your local government for unpaid obligations like:

• Utility bills: Water, sewer, or garbage collection fees.

• Code enforcement: Fines for zoning or building violations.

• Special assessments: Charges for neighborhood improvements (like new sidewalks).

💡 Example: I once had a seller who ignored water bills for years. By the time he sold, his utility lien had grown to $10,000—when a typical bill was only $98 a quarter!

Pros and Cons of Liens

You might be surprised, but liens aren’t always negative.

✅ Pros

1. Access to Credit – Collateral helps you qualify for loans.

2. Lower Interest Rates – Secured loans are less risky for lenders.

3. Higher Loan Amounts – You can often borrow more against your property.

4. Flexible Repayment – Longer timelines, lower monthly payments.

❌ Cons

1. Risk of Foreclosure – If you default, you could lose your home.

2. Harder to Sell – Liens usually must be cleared before closing.

3. Credit Score Damage – Defaults tied to liens can hurt your future borrowing.

Bottom line: Liens are tools. Used responsibly, they can help you buy and build. Managed poorly, they can lead to financial loss.

Final Thought for First-Time Buyers

Buying a home means stepping into a world of contracts, laws, and financial obligations. Liens are one of the most important pieces to understand, because they directly affect your ability to keep—or sell—your home.

Prevent Homebuyer Remorse Before It Begins

Grasping the details of your mortgage, liens, foreclosure processes and utilizing tools like amortization schedules empowers you to take control of your finances and future. If you're contemplating homeownership, begin your education and.....

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• Access free resources, including our mini-class “Homebuying Chaos Unwrapped!” Let’s make your homeownership dream a reality—without the regret!
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By learning now, you can avoid future regrets and ensure your first home is one of your most rewarding investments.

Disclaimer: This content is intended to educate first time homebuyers and let you know there are options. Discussing the issues with the professionals you hire during your home buying journey is prudent. We are not recommending or advising you on your financial or legal situation

Let’s demolish homebuyer remorse together—one empowered buyer at a time.

 Julie Marion 

Founder of The First Time Homebuyer Workshop, homebuyer educator, Urban Planner, Freddie Mac Credit Counselor, Real Estate Broker, Podcast Host, You Tube Contributor.

www.TheFirstTimeHomebuyerWorkshop.com

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• Lien FAQ for First-Time Homebuyers

  1. What is a lien on a property, and how can it affect your ability to buy or sell a home?
  A lien is a legal claim against a property for unpaid debt—like taxes, contractor bills, or loans. If a lien exists, the owner cannot transfer clear ownership until it’s paid off. For buyers, that means you could inherit someone else’s financial problem if it’s not discovered in advance.

  2. How does a mortgage lien differ from other types of liens, like tax or mechanic’s liens?
  A mortgage lien is voluntary—you agree to give the lender a claim on the property until the loan is repaid. Other liens, like tax liens (from unpaid property taxes) or mechanic’s liens (from unpaid contractors), are involuntary and can be more damaging because they weren’t agreed to upfront and can delay or prevent a sale.

  3. Can a lien remain on a property after the owner sells it?
  Yes. If not resolved before the sale, a lien can transfer with the property. That’s why a title search and title insurance are critical—to make sure you don’t unknowingly become responsible for someone else’s debt.

  4. Why is it important for first-time homebuyers to request a title search before closing?
  A title search uncovers existing liens, unpaid taxes, judgments, or ownership disputes. Without it, you might buy a home only to discover legal or financial problems later. This step protects your investment and ensures you’re getting clear ownership.

  5. How could an unpaid lien impact your long-term homeownership rights?
  If a lien isn’t cleared, the lienholder could force the sale of your home to satisfy the debt—even if it wasn’t yours originally. This is why understanding liens is just as important as knowing your mortgage terms.