Mistakes

Why a deal dies from seller not disclosing all liens (and how to stop it)

A deal often dies when a seller fails to disclose all liens, leading to unexpected costs or title complications at closing. The habit that prevents this is always ordering a preliminary title report early in the due diligence process, regardless of what the seller says.

October 20, 2026 · 3 min read

The critical role of a preliminary title report

A preliminary title report, often called a 'prelim,' is your first line of defense against undisclosed liens. It's a snapshot of the property's public record, listing any recorded encumbrances.

Order this report as soon as you have a signed purchase agreement. Do not wait until the last minute before closing.

The prelim will highlight mortgages, tax liens, judgments, and other claims against the property. This information is crucial for accurately underwriting the deal.

Common liens sellers might forget or hide

Sellers might forget about old contractor liens, municipal liens for unpaid utility bills, or even child support judgments that attach to real estate. These are often not top of mind for a seller.

Sometimes a seller is embarrassed about his or her financial situation and intentionally avoids mentioning a lien. It is not always malicious, but it still impacts your deal.

Property tax liens are common, especially with motivated sellers. Always assume there are some outstanding taxes unless explicitly shown otherwise.

How liens impact your cash offer and closing

Every lien represents a debt that must be satisfied before you can take clear title. This means money has to come out of the sale proceeds to pay off these obligations.

If the total amount of liens exceeds your offer price, the deal can't close unless the seller brings cash to the table or the lienholders agree to a short sale.

Undisclosed liens cause delays, frustration, and can kill a deal outright if they surface late in the process and cannot be resolved quickly or affordably.

The conversation to have when a lien is discovered

When the prelim reveals an undisclosed lien, immediately schedule a direct conversation with the seller. Approach it calmly and factually.

Present the lien information from the title report and ask the seller how he or she plans to address it. He or she might genuinely be surprised or might have forgotten.

Explain that the lien must be cleared for the sale to proceed. Do not accuse; focus on finding a solution together.

Building trust to encourage full disclosure

From the first call, establish yourself as a problem-solver, not an adversary. This encourages the seller to be more open about his or her situation, including potential financial issues.

Emphasize that you're here to help him or her sell his or her house as-is and move on. Reassure him or her that you have seen it all and his or her situation is not unique.

A seller who trusts you is more likely to volunteer information, even if it's uncomfortable, which prevents surprises later in the process.

What if the seller genuinely didn't know?

It's common for sellers to be unaware of certain liens, especially older ones or those tied to former spouses or previous owners. Do not assume malice.

In these cases, guide him or her through the process of obtaining payoff statements or contacting the relevant parties. Your transactional attorney or title company can often assist with this.

If the seller is cooperative, work with him or her to resolve the lien. If the seller becomes defensive or uncooperative, that is a red flag for the deal.

Questions people ask

What types of liens can kill a deal?

Mortgage liens, property tax liens, HOA liens, judgment liens, and mechanic's liens can all kill a deal if they are too large or cannot be cleared before closing.

Who pays for the preliminary title report?

Typically, the buyer (you) pays for the preliminary title report as part of your due diligence, but this can be negotiated. It's a small expense that saves you much bigger headaches.

Can I still buy a house with a lien on it?

Yes, you can, but the lien must be paid off or released at or before closing using the sale proceeds or funds from the seller. You cannot take title to a property with active liens.

What's the difference between a recorded and unrecorded lien?

A recorded lien is publicly filed with the county recorder's office, showing up on a title search. An unrecorded lien is not publicly filed, making it harder to discover, though less common for major encumbrances.