What Is a Lien Sale?

A lien sale is a sale of an asset subject to lien, or of the lien itself, to recover a debt. This is most commonly seen with motor vehicles and real estate. Before a lien sale can take place, the creditor needs to have the legal authority to perform the sale, and may need to publish notices to provide information, depending on regional laws. Lien sales can be a useful resource for low-cost goods, although the property is typically sold as is and can be a risky purchase.

In some cases, lien sales involve direct sales of property. For example, a mechanic who performs repairs on a car and is not paid for them has a lien on the vehicle and can sell it to recover the costs after notifying the owner and allowing a sufficient period of time to elapse. Lien sales may feature a number of vehicles pooled together at a single auction for the purpose of efficiency. Usually the property is available for inspection before the sale.

Other lien sales involve the sale of the lien, but not the asset itself. A common example is a tax lien, a lien placed on a property for nonpayment of taxes. The government can sell the lien to recover the taxes, and the homeowner has a set period of time to redeem the lien before the title reverts to the ownership of the lien's buyer. For buyers, purchasing liens results in either recovering the money and the interest owed, or in taking title to the property and being able to use or sell it.

When a creditor prepares for a lien sale, it must send a final notice to the owner of the property to alert him to the fact that a sale is planned, and provide information about what to do to avert the sale. If the debtor does not respond or a resolution cannot be reached, the creditor can proceed with the sale. Creditors must be able to take title to the property before they can sell it at a lien sale, and it is important to be aware that there may be other liens on the property which could cloud the title; a car, for example, might have a lien associated with a car loan as well as mechanic's lien for nonpayment.

Buyers at a lien sale should inspect the property as fully as possible, and get an opinion from an expert evaluator if they are not familiar with the value and pricing of similar property. It is also advisable to conduct some research to find out about other outstanding liens that could complicate transfer of the title.