What liens get paid at closing when I sell a house in Pennsylvania?

Your mortgage is the most common payoff. In Philadelphia, the City files liens for unpaid property taxes and water charges, and says a lien can make a property harder to sell. Those get paid from the sale proceeds at closing. Philadelphia also says transfer tax is due if mortgages, liens or debts on the property are not paid at closing, so expect the payoffs to be handled in the settlement. The closing agent is the traffic cop. The buyer's money goes to the title company or attorney, which pays each lienholder, then pays your proceeds. Liens are paid in order of priority under the law, so a mortgage and a tax lien do not all sit on equal footing. The attorney or title company will check priority. What you need to do is give them accurate information up front, such as any debts you know about, so there are no surprises in the final week.

A Pennsylvania judgment entered in a county creates a lien on real estate there for five years, renewable. At settlement, it must be paid or released. A federal tax lien attaches to all your property, including real estate, and the IRS releases it within 30 days after you pay the debt. If the debt exceeds your equity, you may need to negotiate or ask the IRS about a discharge.

The title company searches the public records and prepares a payoff list. It then collects payoff letters from each lienholder and pays them at closing. You see the figures on the settlement statement. If the liens are more than the price, the sale cannot close without a deal with the creditors or cash from you.

Here is a hypothetical. A house sells for $200,000. The statement lists a mortgage payoff of $85,000, back taxes and water of $6,000, a judgment payoff of $9,000, the seller's share of transfer tax, and other costs. The seller receives what is left. Review the statement before closing day and ask for it a few days early. Compare each payoff to the lienholder's letter. Ask what happens if a payoff changes by closing. Make sure the title company will send a release or satisfaction for each lien, and ask when you will get proof it was recorded.

Kaizen Home Buyers buys houses as-is for cash. We make an offer within 24 hours, with no repairs and no agent commission, and can close in 14 to 30 days or on your date. A sale price that covers the liens is the key. Call 267-329-0084. For complicated payoffs, ask a real estate attorney to review the numbers.