Wholesaling Houses With Liens in Texas

The short answer

Can you sell a house with liens in Texas?

Yes. Most liens are paid from the sale proceeds at closing, and some never attach to a homestead at all.

A title company searches the records, lists every lien and orders payoffs. If the price covers them all, the sale closes normally and each creditor is paid. If it does not, the owner can negotiate payoffs down. In Texas, judgment liens generally cannot attach to a true homestead, so a title company may clear them with a homestead affidavit instead of a payment.

The opportunity

Why liens create wholesale deals in Texas

Owners with liens often believe they cannot sell, or that they will walk away with nothing. Many stop maintaining the house and stop answering mail. A wholesaler who orders a title search, explains which liens truly matter and shows the owner a path to closing can uncover equity the owner thought was gone.

Lead sources

How to find houses with liens in Texas

• Abstracts of judgment. Search county real property records for recently recorded abstracts of judgment against homeowners.
• Federal tax liens. Notices of federal tax lien are recorded in the county records too.
• Mechanic’s lien filings. Contractors who were not paid record affidavits of lien. Owners in a dispute with a contractor may sell.
• City liens. Mowing, demolition and clean-up liens point to neglected properties. See our code violation guide.
• Stack with tax delinquency. Owners with several liens and unpaid taxes are usually under the most pressure. See Texas tax delinquent properties.

Your exit

Presenting a lien-heavy deal

Buyers want to know the title will be clean at closing. Share the preliminary title report and the payoff estimates, and say which liens the title company expects to clear by payment and which by affidavit or release.

If the deal depends on a creditor accepting less, do not market it as certain until the reduced payoff is in writing. A short pay that falls through at the last minute costs you the buyer’s trust.

Step by step

How to start wholesaling houses with liens in Texas

1. Order a title search early. Ask an investor-friendly title company for a preliminary report before you price the deal.
2. Classify each lien. Separate mortgages, taxes, judgments, federal liens and contractor liens.
3. Check homestead status. Confirm whether the house is the owner’s homestead, which may protect it from judgment liens.
4. Get payoffs. Request written payoffs for every lien that must be paid.
5. Run the math. Subtract liens and costs from value with the wholesale fee calculator.
6. Negotiate if needed. Help the owner ask creditors for reduced payoffs, in writing.
7. Sign, disclose and close. Use a purchase contract, the written assignment disclosure, and close through title.

A homeowner in Waco assumed she could not sell because a $41,000 credit card judgment was recorded against her. She had stopped answering mail and let repairs slide. The house had been her homestead for 15 years, and she had a modest mortgage balance.

The title company’s search showed the abstract of judgment. Because the house was her homestead, the title company agreed to insure over the judgment with a homestead affidavit, since Texas judgment liens generally do not attach to a true homestead. That left only the mortgage to pay. You signed at $150,000 with the written assignment disclosure.

A flipper paid $162,000 for the assignment. Title paid off the mortgage, and the owner left with more than $50,000 she thought she would never see. The judgment creditor received nothing from the sale, which surprised her, but that is exactly what Texas homestead law provides.

Texas rules to know

How Texas homestead law changes the math

The Texas Constitution protects a homestead from forced sale for most debts. As a result, an abstract of judgment generally does not create a lien on a property that is truly the owner’s homestead. Title companies often accept a homestead affidavit from the owner to insure over such judgments.

The protection has limits. Mortgages, home equity loans, property taxes, federal tax liens and properly made home improvement liens can still reach a homestead. Never assume a lien is harmless; let the title company decide which ones must be paid.

Learn it with a mentor

Learn to read a title report

Lien deals are won by reading the report correctly. Mentorship students review title commitments with a mentor before they make offers.

FAQ

Houses With Liens in Texas: common questions

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