Can You Sell a House With Liens in Pennsylvania? How Payoffs Work

The good news is that the process is routine, and plenty of houses sell with a mortgage still on them. The title company finds what's owed, gets an exact payoff from each creditor, and pays them out of the purchase price on the day of closing. You see every payoff line on the settlement statement before you sign.

Two things surprise sellers. A lien can be filed against you without anyone telling you it's attached to the house, so the title search is often the first time people learn about an old judgment or tax lien. And liens are searched by name, so a judgment against someone with a name like yours may show up. Title companies often clear that with a signed statement that the judgment isn't yours.

You don't have to wait for the title search to look. Judgments and tax liens are indexed by name at the county Prothonotary's office, and mortgages are recorded at the Recorder of Deeds. Both are public records you can search at the courthouse, and many counties put them online. The Department of Revenue posts its lien list on myPATH (Department of Revenue), and the county Tax Claim Bureau can tell you what's owed in back taxes. A title search is still the only way to be sure nothing was missed.

A payoff statement isn't the same as the balance on your monthly statement. It adds interest through a “good through” date, plus any fees the lender is owed, and gives a daily interest amount for each day after that. Federal law requires a home lender or servicer to send an accurate payoff balance within seven business days of a written request from you or someone acting for you, like your title company (15 U.S.C. § 1639g).

A home equity line of credit needs one more step. Paying the balance to zero doesn't close the line, and an open line still lets someone borrow against the house. Title companies have you sign an authorization to request the payoff and to close any open line of credit on the property, then ask the lender to close it when the payoff is sent.

Many first-time buyers in Pennsylvania also have a second mortgage from a down payment program. The Pennsylvania Housing Finance Agency's K-DATE assistance, for example, is a 0% second mortgage with no monthly payments that comes due when the home is sold, the mortgage is refinanced or the first mortgage is paid off (PHFA). It shows up on the title search and is paid from your proceeds like any other loan. If you can't remember what you signed at your own closing, your old settlement statement lists it.

After closing, the lender has to file a satisfaction so the mortgage comes off the county records. If it doesn't, Pennsylvania's Mortgage Satisfaction Act lets the owner send the lender a notice by certified or registered mail. If the lender still hasn't presented a satisfaction for recording within 60 days of getting the full payment and that written request, it can owe a penalty of up to the original loan amount, plus attorney fees (21 P.S. § 721-6).

A money judgment from a Court of Common Pleas becomes a lien on real estate the debtor owns in the county where it's entered, and it stays a lien for five years unless the creditor revives it (Stewart Title). A judgment from a local magistrate, such as a small claims or landlord-tenant case, is different: it doesn't become a lien on real estate until a transcript is filed with the county court, and that can't happen until 30 days after the judgment (42 Pa.C.S. § 1516).

Married couples get one important protection. A judgment against only one spouse isn't a lien on a house the two of them own as tenants by the entireties (Stop 35, Inc. v. Haines, Pa. Super. 1988). That changes after a divorce, and a judgment against both spouses on a joint debt can attach. Ask the title company to read your deed against the judgment before you plan around it.

The Department of Revenue says a state lien makes the Commonwealth a priority creditor whose debt must be paid before a home sale can go through (Department of Revenue). For a federal lien, the IRS can issue a certificate of discharge when it's paid the value of its interest in the house, or when its interest has no value after the liens ahead of it (Publication 783). Start early on either one: these offices don't work on a closing's timeline.

Unpaid sewer, water and trash bills can be filed as municipal claims, which stay a lien on the house for up to 20 years (Stewart Title). The lien for a service bill starts on the date the owner is billed, before any claim is filed, so the title company asks each tax collector, borough and authority for a certificate showing what's owed through the closing date. The current quarter or year is split between you and the buyer by date, the same way property taxes are.

• Find your latest tax bills and any delinquent-tax notice from the county Tax Claim Bureau.
• Gather the account numbers for sewer, water and trash, including any separate sewer authority.
• Write down every mortgage, home equity loan or line, and down payment assistance loan you've had on the house.
• Look for letters about court judgments, state or federal tax liens, or a contractor's lien.
• Find the settlement statement from when you bought the house, and from any refinance.
• Give the list to the title company on day one. A lien it learns about late is the one that moves the closing.

Unpaid real estate taxes are turned over to the county Tax Claim Bureau the year after they're due, and the bureau can schedule a tax sale on its own calendar. Luzerne County's bureau sells certified tax searches showing what's owed. Our guide to being behind on property taxes in Pennsylvania covers the tax sale timeline and the ways to stop one.

Start with the arithmetic: the price, minus the costs of selling (your share of transfer tax, any agent commission, and the current-year tax and utility splits), minus every payoff. If that number is negative, the sale can't close unless you bring the difference or a lienholder accepts less. Our cash offer guide shows how the costs to sell figure into a price.

With a mortgage, accepting less is a short sale. The lender has to approve it, it can take months, and you may still owe the gap unless the lender waives it. The Consumer Financial Protection Bureau's advice is to ask the lender to waive the deficiency before closing and to get any waiver in writing (CFPB). Judgment creditors sometimes accept less to be paid at a closing, too; if one agrees, get the release terms in writing before you sign.

Once the payoffs and certificates are in, we can close in 7 days or sooner if you need it, and the walkthrough number already accounts for what nobody can see. We go over every payoff with you before closing, so the amount you take home isn't a surprise. See our Cash, Cash+ and Max Cash options and how we buy houses that are behind on the mortgage.