What is a Lien Sale?

Last Updated: July 03, 2022 6 min read
Author: Zach L.

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A lien sale is the sale of the claim on an asset to pay for an unsatisfied debt. Lien sales usually are conducted public auction style and anyone can attend.

What is a Lien Sale?

A lien sale happens when an asset owner is delinquent on their debt and the debt is sold to another party.

After the lien sale has taken place the owner of the house or car or whatever asset they have has to pay the party that purchased the tax lien sale certificate. The kicker here is there is also interest involved. If the asset owner is unable or chooses not to pay the balance of the debt and the accrued interest, foreclosure is a possibility.

Lien sales can be an interesting and profitable investment vehicle and have a few different ways that they work.

How To Do a Lien Sale?

The National Tax Lien Association (NTLA) states there are 2,500 cities, townships, and counties (jurisdictions) that sell public tax debt. A tax lien sale has to have a public listing and also must be advertised publicly to interested parties before the lien sale date. The information frequently provided in the advertisement includes the owner of the asset (vehicle or property), description, and the total amount of taxes owed.

The buyers of liens are frequently collection agencies, but if the sale is an auction anyone can come in and place the highest bid. The winning bids are usually the highest bidder or those that have the lowest premium bids. After a lien is purchased, the new owner of the debt is able to charge interest on the debt until it is paid in full. Each state sets a maximum on the interest rate able to be charged. If the lien holder is not paid in full, they are able to begin the foreclosure process on the real estate.

The benefit of lien sales for a local government is the ability to collect a portion of the unpaid taxes, and that can be used by the treasurer’s office. The winning bidder that comes in and buys the debt uses the delta between the amount they paid for the debt as well as the interest they can charge on the debt for a decent rate of return.

If you are a homeowner with unpaid debt, it is highly recommended to avoid arriving at a lien sale. Speak with your financial advisor, and seek legal advice as there are a few exemptions that exist. There are a few property tax exemptions for senior citizens, veterans, those that qualify as disabled, etc.

Lien Sale Examples

Lien Sale Examples

Let’s use this as an example. Let’s say there is a property owner in your city that owes back taxes on their property taxes and hasn’t been paying their water bill. Your city has reached out to the property owner multiple times and hasn’t seen a dime. The city sends the property owner a notice of pending lien sale to let them know that the city is going to use their legal right to put up the debt for sale at a lien sale auction style.

The day of the general public auction comes and the fictitious company, Acme Collection Company, buys the debt from your city. They purchase the debt at a rate of five cents per dollar and agree to charge the state’s maximum interest rate of 9% on the debt. Acme Collection Company pays the city the amount due, and it is recorded in public record. Acme Collection Company also has the ability to foreclose on the property if the debts are not paid by the expiration date of the debt. Foreclosure on the personal property would transfer ownership of the property to Acme Collection Company.

The company is taking the risk that the property owner never pays the debt, and the company will go through the foreclosure process on the property and have to sell it after the long foreclosure process is over. There is a lot of work involved for Acme Collection Company, but they also stand to make a pretty penny once the entire process is complete.

What is Lien Sale Paperwork?

What is Lien Sale Paperwork?

Lien sale paperwork is the required documents for a lien sale in your jurisdiction. It clearly states and proves that the steps for a legally valid lien sale have taken place. This is usually provided by the tax lien holders. Depending on the type of lien, this can be a jurisdiction or a third party if it is an auto lien sale for example.

Lien Sale Title Transfer

Depending on the jurisdiction you live in, the title transfer process can vary greatly. I recommend talking to the officiant of the lien sale and having them point you to an official government website for your jurisdiction for the laws surrounding lien sale title transfers. For example, in some states, the vehicle must be titled with a new title at the department of motor vehicles within 15 days of possession of a vehicle, and others are less. So it is best to research the specifics for your jurisdiction.


What is a lien sale on a car?

When the registered owner of the vehicle has debts (loans, back taxes, etc) on a vehicle, a lien is placed on the vehicle. If the lien goes unpaid, it can get to the point where the vehicle owner has their vehicle repossessed and it is sold at a lien sale.

This provides the creditors an opportunity to recoup some of their lost capital, and investors to be able to come through and bid on a purchase price lower than MSRP. Once a lien sale has been completed, license plates are removed and destroyed, lien sale paperwork is filled out, and possession of the vehicle is turned over to the buyer.

What is a lien sale on a house?

What is a lien sale on a house?

When property owners have debts against their property there is a lien in place. This can be a mortgage, back taxes, a home equity line of credit (HELOC), etc. If the owner of the property goes delinquent on their debt, a lien sale can take place.

A lien sale on a house is when the unpaid debts are sold to an investor, frequently a debt collection agency. The investor receives a tax lien certificate and becomes the legal owner of the debt. The investor is allowed to charge a state-by-state regulated interest rate on the debt. The investor also usually buys the debt for pennies on the dollar and has the ability to foreclose on the property if the debts go unpaid for too long.

Final Thoughts

A lien sale takes place when the owner of an asset is delinquent on their debt and the delinquent debt is sold. As a car or homeowner, it is highly recommended to set up a payment plan and stay out of the lien sale process.

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