Selling a house with a judgment or IRS lien in Maryland: what the title search finds, how payoffs work, and what to do when the liens eat the equity

A lien on the house is not a reason it cannot sell. It is a bill that gets paid at the settlement table before you do. Maryland title companies clear judgment liens and tax liens on ordinary houses every week, and most sellers never speak to the creditor at all. The sale stalls in three places: when nobody orders the payoff early enough, when the Internal Revenue Service is involved and the 45 day clock was never started, and when the liens add up to more than the house is worth. This article walks through how each kind of lien attaches, what the title company does about it, and what your options are when the math does not close.

How a judgment becomes a lien on your house

In Maryland a money judgment entered in a circuit court is a lien on every piece of real property the debtor owns in that county from the day it is entered and indexed. That is Maryland Rule 2-621 and Section 11-402 of the Courts and Judicial Proceedings Article. A judgment from the District Court, where most credit card, medical and car loan deficiency cases land, does not touch the house on its own. The creditor has to record a notice of lien in the circuit court for the county where the house sits, and debt buyers do that as a matter of routine.

A Maryland judgment lasts twelve years, and the creditor can renew it before it expires, which resets the clock for another twelve. Post-judgment interest runs at the legal rate of ten percent a year on most judgments, simple interest, so a judgment left alone for ten years has roughly doubled by the time a title company finds it.

What the title search finds, and the false hits

The title company searches the county judgment index and Maryland Judiciary Case Search by the name of every owner on the deed. A common name turns up judgments against strangers. Those are cleared with a lien affidavit you sign at closing stating you are not that person, and they cost you nothing. A judgment that is actually yours gets a payoff request to the creditor’s attorney, and the figure goes on the settlement statement as a seller charge.

A judgment you already paid can still show as open. Maryland Rule 2-626 puts the burden on the creditor to file a line of satisfaction once it is paid. If they never did, the title company needs a signed release or an order of satisfaction from the court, which takes time when the creditor closed its doors years ago. Pull your own name on Case Search before you list, not after.

Federal tax liens and the 45 day rule

When the IRS assesses a tax and you do not pay after demand, a lien arises automatically on everything you own under 26 U.S.C. 6321, the house included. The IRS makes it public by filing a Notice of Federal Tax Lien with the clerk of the circuit court for the county where the property sits. The lien follows the collection statute, generally ten years from the assessment date unless the IRS refiles or the clock was paused by a bankruptcy, an offer in compromise or time spent outside the country.

You do not have to pay the whole tax debt to sell the house. You need the IRS to release the house from the lien, which is a certificate of discharge under 26 U.S.C. 6325(b). The application is IRS Form 14135 and the instructions are Publication 783. The IRS asks for it at least 45 days before closing, with the contract, a title report, the draft settlement statement and an appraisal or a written offer as the evidence of value. In the common case the IRS agrees to discharge the house in exchange for whatever net proceeds are left after the mortgage and earlier liens are paid, and the lien stays attached to you for the rest of the balance. If the earlier liens eat every dollar, the IRS can still discharge, because its interest in the house is worth nothing.

Maryland Comptroller liens

Unpaid Maryland income tax and sales tax become a lien when the Comptroller records a notice of lien in the circuit court under Sections 13-805 and 13-806 of the Tax-General Article. The Comptroller’s Compliance Division issues payoff letters and releases. In our experience it is slower than a judgment creditor and about as slow as the IRS, so the title company requests the figure the day the contract is signed.

Who gets paid first at the table

Maryland liens pay in the order they were recorded, with two wrinkles. Property taxes and other county charges come off the top no matter when they arose, and a federal tax lien takes its place in line from the date the notice was filed, so a mortgage recorded before the IRS notice still gets paid first. Then the title company works down the list: first mortgage, second mortgage or equity line, judgments and tax liens by date, any HOA or condo balance under the resale packet rules, and finally you. Our seller closing costs article covers what the rest of the settlement statement looks like, and the HOA and condo lien article covers that line.

When the liens are bigger than the equity

This is where sellers freeze, and it is still workable. A judgment creditor holding an old debt usually accepts less than the face amount for a lump sum at closing, because the alternative is waiting on a house that may never sell with them on it. Get the agreement in writing before you sign a sales contract, with the exact payoff and a promise to record a release, and have the title company hold it. The IRS discharge process already handles a short equity position. A mortgage lender can approve a short payoff if the liens behind it are released, which is its own process with its own timeline. And a bankruptcy attorney can tell you in one meeting whether a judgment lien on your residence is one that a filing could avoid.

Two moves make things worse. Deeding the house to a relative does not shake a lien. The lien rides with the property, and the transfer can be undone under Maryland’s fraudulent conveyance law. Letting the house go to tax sale or foreclosure to wipe out the judgments trades a problem with options for one without any. Our tax lien page and foreclosure timeline article explain how late a sale can still close in each case.

Selling a liened house to us

Liens change the timeline more than the price. Tell us what you know and we order title the day the contract is signed rather than on the standard schedule. The title company pulls every payoff, we prepare the IRS discharge application with you when there is a federal lien, and we set the closing date for the day the slowest release can land, usually two to three weeks on judgments alone and closer to seven weeks when the IRS is in the file. Our written offer shows the math against a listing, every lien comes off the price at the table, and we pay the standard seller closing costs. If the payoffs come to more than the price, we tell you before you sign anything and help you work the creditors, because a contract that cannot close is worth nothing to either of us.

A lien is paperwork with a dollar figure attached. Find out what is recorded against you, get the payoff requests out early, and start the IRS form the day you decide to sell. The house will close. Only the date moves.