Selling a House With Liens in California

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Yes, you can sell a California home that has liens on it. In most sales, escrow requests a payoff demand from each lienholder, pays them from your sale proceeds at closing, and gets a release or reconveyance recorded so the buyer takes clear title. Trouble starts when the liens add up to more than the home will net. Then you’ll need a tax-lien discharge or partial release, a negotiated payoff, a mechanics lien bond, or a short sale.

This guide covers each common lien type, the official process for clearing it, and what to do when the numbers don’t work. It’s general information, not legal or tax advice.

Start with the preliminary title report

Recorded liens, from deeds of trust to judgments, tax liens, mechanics liens and HOA notices, show up on the preliminary title report. Ordering one before you list surfaces surprises early. Our guide to title insurance in California explains what title covers.

Mortgages and home equity loans: payoff demands and reconveyance

Your loans are the most routine liens. Escrow sends each lender a written request for a payoff demand statement. Under Civil Code section 2943:

• The lender must deliver the statement within 21 days of receiving the written demand. A lender that willfully fails is liable for damages plus a $300 forfeiture.
• The statement shows the amount needed to pay the loan in full, with per-diem interest for up to 30 days.
• The lender can charge up to $30 per statement, though that cap doesn’t apply to FHA-insured or VA-guaranteed loans.
• For a voluntary sale, you can rely on the statement until close of escrow, transfer of title or recording of a new lien, whichever comes first.

After payoff, Civil Code section 2941 sets the cleanup timeline. The beneficiary has 30 days to send the reconveyance request and documents to the trustee, and the trustee has 21 days after receiving them to record the reconveyance. If nothing is recorded within 75 days of payoff, a title company may record a release of the obligation after giving notice.

If you’re behind on payments, a notice of default may already be recorded, and the payoff will include fees and arrears. See our California foreclosure process guide.

Judgment liens

A creditor who wins a money judgment can turn it into a lien on your real estate by recording an abstract of judgment with the county recorder (CCP §697.310). The lien lasts 10 years from the date the judgment was entered, unless it’s satisfied, released, or renewed under the renewal rules in section 683.180.

At sale, escrow asks the creditor (or its attorney) for a payoff and a recordable release or acknowledgment of satisfaction. If a creditor agrees to take less, get the reduced payoff in writing, signed, before closing. If a judgment isn’t yours, tell the title officer early.

Federal tax liens (IRS)

According to the IRS, a federal tax lien arises after the IRS assesses a tax, sends a bill, and the debt goes unpaid. A Notice of Federal Tax Lien puts creditors on notice.

You have three main paths when selling:

1. Pay in full from proceeds. The IRS releases the lien within 30 days after the liability is paid (Publication 1450). Payoff figures are available from the Centralized Lien Operation at 800-913-6050.
2. Certificate of discharge. A discharge removes the lien from the specific property being sold. File Form 14135 at least 45 days before closing, with an appraisal, title report, proposed purchase contract and proposed closing statement, as listed in Publication 783. The publication describes several bases for discharge:
   • 6325(b)(2)(A): you pay the government an amount equal to its interest in the property.
   • 6325(b)(2)(B): the government’s interest has no value because senior debts exceed the property’s value. This can apply in a short sale.
   • 6325(b)(3): the sale goes forward and the proceeds are held in an approved escrow while the claim is resolved.
3. Subordination. This keeps the lien in place but puts another lender ahead of the IRS. It’s mainly a refinancing tool, not a way to sell (the IRS lien page points to Publication 784).

Build the 45-day lead time into your contract timeline.

California state tax liens (FTB)

The Franchise Tax Board says on its lien page that unpaid tax creates an automatic statutory lien. FTB may record a Notice of State Tax Lien with the county recorder, and a lien lasts at least 10 years and can be extended.

• Payoff through escrow. Escrow, title or mortgage companies request the payoff through FTB’s eDemand system, which FTB says takes 3–5 business days, versus about 10 business days by fax and 21 or more by mail. A lien payoff request must include a completed FTB 3518. FTB releases the lien after payment posts.
• Partial release. If there isn’t enough money to pay all state tax liens, FTB’s lien help page says you may qualify for a partial release of the property being sold. FTB says it doesn’t issue zero demands. Call the Lien Program first, then send the package, which includes a seller letter, estimated closing statement, preliminary title report, appraisal, copies of other liens, and a short sale approval letter if applicable. FTB asks for it at least 21 business days before escrow closes.
• Other state agencies. CDTFA, EDD and other agencies have their own lien processes. Contact each one separately.

FTB says that between state and federal tax liens, priority depends on when each liability was first created.

Mechanics liens

Contractors, subcontractors and suppliers who aren’t paid can record a claim of lien, but the deadlines are strict:

• A direct contractor must record within 90 days after the work is complete, or 60 days after you record a notice of completion or cessation, whichever is earlier (Civ. Code §8412).
• Subcontractors and suppliers must record within 90 days after completion, or 30 days after a recorded notice of completion or cessation, whichever is earlier (§8414).
• The claimant must file a lawsuit to enforce the lien within 90 days after recording, or the lien expires, unless a recorded credit agreement extends it (§8460).

Ways to clear one before closing:

1. Pay or settle and get a recorded release.
2. Record a release bond. If you dispute the claim, a bond from an admitted surety for 125% of the claim amount releases the property (§8424).
3. Petition the court to release the property if the claimant didn’t sue in time (§8480).

If you hired a contractor within the past 18 months and are reselling, you also have contractor disclosure duties. See our unpermitted work guide.

HOA liens

If you fall behind on HOA dues, the association can record a notice of delinquent assessment. Under Civil Code section 5675, the lien attaches once that notice is recorded and can include the assessment plus collection costs, late charges and interest. An HOA can’t foreclose on delinquent regular or special assessments under $1,800 (not counting fees and interest) unless they’re more than 12 months delinquent (§5720).

At sale, escrow requests the HOA’s demand along with the resale documents, and the balance is paid at closing.

When liens exceed what the home will sell for

Add up every payoff, plus your selling costs and transfer tax. If the total is more than the likely sale price, you have a few options:

• Negotiate with junior lienholders. Judgment creditors, contractors and some private lenders may take a reduced payoff to get paid now.
• Use tax-lien tools. IRS discharge under 6325(b)(2)(B) and FTB partial releases exist for underfunded sales.
• Short sale. Your mortgage lender agrees to accept less than it’s owed. Under CCP §580e, when the holder of a deed of trust on a 1–4 unit dwelling gives written consent to a short sale, it generally can’t pursue a deficiency on that note, and it can’t demand extra payment for its consent. Exceptions include fraud or waste, and borrowers that are corporations, LLCs or limited partnerships. Our short sale process guide and short sale negotiation guide walk through it.

Tax consequences of forgiven debt are a separate question. Ask a tax professional before you sign.

How we handle lien-heavy sales at Diamond

We order the preliminary title report early, map each lien to its payoff process and lead time, and set contract deadlines that fit the slowest one. On a sale with an IRS or FTB lien, that usually means a longer escrow. If you’re weighing your options, start with a home valuation, learn how we approach selling your home, or contact us.

Questions people ask

Can I sell my house if there’s a lien on it?

Yes. Most liens are paid from the proceeds at closing, and escrow obtains releases so the buyer gets clear title. If proceeds won’t cover everything, you’ll need lienholder agreements, a tax-lien discharge or partial release, or a short sale.

Who pays off liens when a house is sold?

The seller does, from sale proceeds. Escrow collects payoff demands, pays each lienholder at closing, and the title company confirms releases are recorded.

How long does a lender have to send a payoff statement in California?

Twenty-one days from receiving a written demand, under Civil Code section 2943. Escrow usually orders it as soon as escrow opens.

How do I remove an IRS lien to sell my house?

Pay it in full from proceeds, after which the IRS releases it within 30 days. Or apply for a certificate of discharge on Form 14135 at least 45 days before closing, as Publication 783 explains.

Can I sell my house with an FTB lien?

Yes. Escrow requests the payoff through FTB’s eDemand, and FTB releases the lien after payment posts. If proceeds are short, you may qualify for a partial release. FTB asks for that request at least 21 business days before closing.

What if a contractor files a mechanics lien just before I sell?

Check the dates. The claimant must sue within 90 days of recording or the lien expires. You can also record a release bond for 125% of the claim, or settle and get a recorded release.

How long does a judgment lien last in California?

Ten years from entry of the judgment, unless it’s satisfied, released, or renewed, under CCP section 697.310.

Does a short sale clear all liens?

No. A short sale approval from your first lender covers only that loan. Junior lenders, judgment creditors, tax agencies and HOAs each need their own payoff or release.

Sources & notes

1. Civil Code §2943: payoff demand and beneficiary statements. Statute text for all code sections was reviewed through a public mirror.
2. Civil Code §2941: reconveyance deadlines.
3. Code of Civil Procedure §697.310: judgment liens on real property.
4. IRS, Understanding a Federal Tax Lien.
5. IRS Publication 783 (Rev. 12-2022): certificates of discharge, Form 14135.
6. IRS Publication 1450 (Rev. 7-2018): certificate of release.
7. FTB, Liens, Payoff request and Help with liens. Check current processing times.
8. Civil Code §§8412, 8414, 8424, 8460, 8480: mechanics liens.
9. Civil Code §§5675 and 5720: HOA assessment liens and foreclosure limits.
10. Code of Civil Procedure §580e: no deficiency after an approved short sale of a 1–4 unit dwelling.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

Related: Short sale process · Seller net sheet · California escrow timeline · Selling as-is