What Happens if You Inherit a House with a Lien?

If you’ve inherited property in Virginia, there’s a chance you’ve inherited some debt associated with that property. When a loved one passes away unexpectedly, likely that they haven’t resolved their debt, you may find they owe money to creditors who have attached liens to various pieces of their property. 

Liens are maintained on properties as they transfer from a deceased owner to an heir, which means you may be responsible for that debt. This blog post will guide you through the process of dealing with an inherited house with a lien.

Understanding Liability for Debts and Liens

Your loved one may have left you the title to the home, but an outstanding debt in their name still needs to be paid. New arrangements must be made to deal with that debt when the creditor still has a legal claim to your house and can foreclose on it.

Generally, you are not personally liable for the deceased’s sole debts unless you are a spouse under certain conditions.

However, if the estate includes real estate with liens, such as a mortgage, these liens stay attached to the property. Inheriting the property means inheriting the responsibility to deal with these liens.

What types of liens can there be on an inherited property?

When it comes to owning a property, there are certain situations where a lien can be placed on it. A lien is a legal claim that someone has on a property to ensure payment of a debt or other financial obligation.

Let’s take a closer look at the different types of liens that can be placed on a property:

Mortgage Liens

Mortgage liens are the most common type of lien. When you take out a loan to buy a property, such as a home mortgage, the lender usually places a mortgage lien on the property.

If you fail to make your mortgage payments, the lender has the right to take the property through a foreclosure process.

Tax Liens

Government authorities, such as the IRS or local tax agencies, impose tax liens when property owners fail to pay their taxes.

These liens ensure that the government has a claim on the property for the unpaid taxes. If the taxes remain unpaid, the government may sell the property to recover the owed amount.

Judgment Liens

Judgment liens can arise from lawsuits or court judgments. If someone wins a legal case against a property owner and is awarded monetary damages, they can place a judgment lien on the property. This lien acts as security, ensuring that the person will be paid what they are owed from the proceeds if the property is sold.

Mechanics’ Liens

Mechanics’ liens are typically associated with construction projects. If a contractor, subcontractor, or supplier is not paid for their work or materials used in a property’s construction or improvement, they can file a mechanics’ lien. This lien allows them to claim the property’s value to satisfy the owed amount.

Medicaid loan 

This is a very common type of lien, as many people need to rely on Medicaid to pay for their care costs in their later years. And if a person dies and the amount due is not paid, this lien allows them to claim the property’s value to satisfy the owed amount.

What are your options if you inherit a house with a lien? 

When you inherit a house with a lien in Virginia, it’s important to understand your options. The first step is to determine the type and amount of the lien. Remember, there can be multiple liens on the house, like a mortgage and a Medicaid lien, so get the full picture before making any decisions. Once you know how much is owed, you can consider the following options:

Negotiate with the creditor

Sometimes, you can work out a payment plan with the creditor to pay off the lien over time. Many creditors are also open to negotiating a settlement where you pay a reduced amount to clear the debt. This is a good option if you want to minimize the amount you owe and have other means to pay it off.

Pay off the debt with savings

If you have inherited cash or have enough savings, paying off the debt yourself is the quickest and simplest solution. It gives you full ownership of the property. You can also negotiate to pay off the debt at a reduced amount.

Use a loan

If the lien amount is relatively small, consider using a personal loan or a low-interest-rate credit card to pay off the balance. However, be cautious and make sure you won’t face financial difficulties.

Consider factors like your ability to afford the monthly payments, the condition of the house, and the interest rate. Refinancing the property and obtaining a new mortgage might be a better option in some cases.


If you’re in a good financial position, you can get a mortgage on the inherited home to pay off the liens. This can be a smart choice if you have significant equity in the property, meaning the mortgage would be a small percentage of its value.

Refinancing can also provide funds for renovating the house. If you plan to sell your current home, using the equity from that sale to refinance the inherited property can be advantageous.

Sell the house

You may decide to sell the property if you want to keep the house or need help to afford to pay off the lien. You’ll need to use the proceeds to pay off the lien(s) when you sell it. The remaining profit from the home will be yours in cash.

If you want to agree with the creditor to pay off the lien at a reduced rate, either because you have the cash, plan to take out a loan or want to refinance to pay off their debt, it is a good idea to speak to an attorney who can deal with the creditor on your behalf.

Tax Implications of Selling Inherited Property

Selling inherited property can have tax implications, particularly concerning capital gains tax. Capital gains tax is levied on the profit from selling property that has increased in value since the original owner’s passing.

However, there are often exemptions and specific tax treatments for inherited property that can reduce this burden. Consulting a tax professional is advisable to navigate these complexities.

Selling an Inherited House with a Lien in Virginia

Selling an inherited house with a lien can be a complex process, but it can be navigated successfully with the right understanding and steps.

Let’s explore the process involved, including disclosure requirements and potential challenges:

Understand the Lien

The first step is to understand the lien on the inherited house fully. Determine the type of lien, the amount owed, and any associated legal obligations. This information is crucial when disclosing the lien to potential buyers and negotiating the sale.

Disclose the Lien

When selling an inherited house with a lien, disclosing the lien’s existence to potential buyers is essential. This disclosure is typically done through a form or document provided by the real estate agent or attorney involved in the sale. Transparently sharing this information ensures a transparent and legal transaction.

Determine the Sale Price

Assess the market value of the inherited house, taking into account the presence of the lien. The sale price may need to consider the lien amount to attract potential buyers while addressing the outstanding debt.

Paying off the Lien

Considering the available funds, consider paying off the lien before selling the house. This can help clear the title and make the property more marketable. Consult with professionals, such as real estate attorneys or financial advisors, to explore different payment options and negotiate with the lien holder to reduce the amount owed.

Proceeds Allocation

If the sale proceeds are insufficient to cover the full lien amount, a portion must be allocated towards paying off the lien. This ensures that the debt is settled, and the property can be transferred to the new owner with a clear title.

Negotiating with the Lien Holder

In some cases, negotiating with the lien holder may be necessary to reach an agreement allowing the sale to proceed. This could involve negotiating a reduced payoff amount or a payment plan that satisfies the lien holder and facilitates the sale.

Seek Professional Assistance

Selling an inherited house with a lien can involve legal complexities. It’s highly recommended to work with professionals, such as real estate agents, attorneys, or title companies, who have experience handling such transactions. They can guide you through the process, ensure compliance with legal requirements, and help you navigate any challenges.


Inheriting a property with a lien on it means you’ve inherited someone else’s problem, and the fastest way to deal with the debt is to sell the home and pay off the creditor. Since selling a home isn’t often a fast process, the best way to ensure you sell the house quickly, clear the debt and get your equity in cash is to sell to a house cash-buying company, HR Property Doctor. We buy homes in Virginia in as-is condition. All you need to do is send us a few details about the house, and we’ll send you our best cash offer. You’re not obligated to accept it, but we can close in a few weeks if you do. 

Paul Johnson

Paul is a reputable local house-buying professional, also a real estate agent (Virginia). Count on his nearly fifteen (15) years of expertise in being part of resolving any issues that may threaten transactions, being accessible, and answering questions, as well as remaining transparent throughout closing transactions. One of Paul's Favorite Quotes: "To Give Anything Less Than Your Best Is To Sacrifice the Gift."

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