Can I Sell My House With an SBA Loan Lien?

SBA Liens

A lien is a claim on an asset resulting from some type of unpaid debt. There are several kinds of SBA liens that can lead to a foreclosure. Sometimes business owners use their homes directly as collateral for an SBA loan, as long as they have enough equity. This means the lender--and through the lender, the SBA--can easily put a lien on property and use it to pay off a debt. If the house is not used as collateral, the SBA may be able to bring a judgment lien against the owner and liquidate funds, including a house.

Property Liens

Property liens follow the property, not the borrower. This means that if a borrower was to give or sell the house with an SBA lien on it (before a foreclosure occurred) the lien would most likely follow the property and the new owner would become responsible for it. This means that even if the owner could find a legal way to sell the house with a lien on it, very few buyers would be interested in it and almost all lenders would refuse to finance the transaction. The property lien essentially locks the property into its current ownership until it is removed.

Settlement

The solution to a property lien like those the SBA stands behind is usually some type of settlement. In a settlement, the owner of a house uses the purchase agreement to remove the lien. The buyer agrees to purchase the property as long as the lien is removed. Sometimes the owner can borrower money from another source to pay the debt and remove the lien, and sometimes the borrower can provide funds for removing the lien from the house transaction itself. Of course, this usually requires the borrower to find someone willing to purchase a house with a lien on it in the first place.

Mortgage Changes

Liens can make other property activities difficult as well. For instance, if a homeowner wants to use a deed to give up the house rather than go through a foreclosure, the bank will refuse to accept it if the house has an SBA lien attached to it. Likewise, trying to sell a house through a short sale to avoid foreclosure cannot be done with associated liens.