Background

Lien priority has long been a cornerstone of real estate finance: it gives lenders and other creditors a clear rule for who gets paid first from a property’s proceeds. The basic principle—first recorded, first paid—keeps title transactions orderly, lowers lending risk, and makes mortgage markets efficient.

How lien ranking works (simple rule and key exceptions)

  • Recording order: In most U.S. jurisdictions, lien priority follows the date the lien is recorded in public land records. A mortgage recorded first is generally senior to any mortgages recorded later.
  • Exceptions you must know:
  • Property tax and special assessment liens: These typically have super‑priority and can jump ahead of earlier mortgages. Local law controls; counties often place property tax liens that must be paid first when a sale occurs (see your county recorder and local tax authority) (CFPB overview of property tax priority and mortgage servicing practices).
  • Mechanic’s or construction liens: Priority can depend on when work began or when the lien was filed—state rules vary. In some states a contractor’s lien can relate back to the date materials or labor started and thus beat later-recorded mortgages.
  • Federal tax liens: The IRS files a Notice of Federal Tax Lien (NFTL); generally the NFTL’s priority is determined by its filing date and is subordinate to existing perfected security interests, but local recording rules and earlier unrecorded interests can complicate priority (IRS, Notice of Federal Tax Lien).
  • Purchase‑money mortgages: In many states the lender who financed the purchase may have special priority over subsequent liens; statutes differ by state.
  • HOA or condo liens: Homeowners’ association assessment liens can have priority over other secured creditors in some states for certain amounts or a limited time.
  • Subordination and intercreditor agreements: Senior lenders can agree to subordinate their interest in writing, changing priority for refinancing or construction financing. See the FinHelp.io guide on loan subordination for borrower considerations.

What this means in foreclosure or sale

When a property is sold or foreclosed, proceeds are distributed to lienholders in priority order. The senior (first) lien is paid first; anything left pays the next lien, and so on. If proceeds don’t cover a subordinate lien, that lender may have an unsecured deficiency claim against the borrower but usually recovers little or nothing from sale proceeds.

Practical borrower steps (what I tell clients)

  1. Pull your title report early. A preliminary title report or title commitment lists recorded liens and their recording dates; it’s the clearest snapshot of priority before a refinance, sale, or workout.
  2. Get payoff letters. If you plan to sell or refinance, request payoff figures from each lienholder to understand how much must be cleared at closing.
  3. Watch for tax and HOA liens. These can appear unexpectedly—check county tax records and HOA statements. I’ve seen sales delayed by unpaid assessments that levied a priority lien.
  4. Consider subordination or consolidation. If a second mortgage blocks a refinance, ask whether the first lender will subordinate or whether you can consolidate debt. Lenders sometimes agree if it improves their overall recovery prospects.
  5. Consult a real estate attorney for complex cases. Mechanic’s liens, judgment liens, and cross‑jurisdictional issues (e.g., liens filed in multiple counties) often need legal review.

Real‑world examples

  • Foreclosure payoff order: A property with a $200,000 first mortgage and a $50,000 second mortgage sells for $210,000 at foreclosure. The first mortgage receives the first $200,000; the second lien receives only the remaining $10,000 and will likely pursue the borrower for the deficiency if state law allows.
  • Unexpected priority tax lien: A borrower refinances without discovering an unpaid property tax bill. At closing, the title company requires the tax lien be paid because it has priority, delaying or canceling the refinance unless resolved.

Common lien types (at-a-glance)

Lien type Typical priority behavior Notes
Property tax lien Often highest priority Local statutes usually give tax liens super‑priority.
First mortgage (purchase money) Senior if recorded first Purchase‑money exceptions vary by state.
Mechanic’s lien Can relate back to work date State‑specific rules.
Judgment lien Priority based on recording May be junior to previously recorded security interests.
Federal tax lien Priority set by NFTL filing and other rules See IRS guidance on NFTLs.
HOA/assessment lien May have limited super‑priority Check state HOA lien statutes.

Common borrower mistakes

  • Assuming all liens are equal. Priority matters—sales and foreclosures pay senior liens first.
  • Not ordering a title report before refinancing or selling. Title companies reveal recorded liens and exceptions.
  • Overlooking municipal or HOA assessments. Small unpaid assessments can block a closing.

When a lien can be removed

Liens are typically released when paid in full and the lienholder files a release or satisfaction with the recorder. For tax liens, the IRS issues a Certificate of Release (or Certificate of Discharge for specific property) after a tax debt is resolved or subordinated (see IRS procedures). Some liens can also be challenged in court for invalidity.

Interlinks and further FinHelp.io reading

Short FAQs

  • Can a second mortgage be pushed to first? Yes — only if the first lender agrees to subordinate their lien or the first lien is paid off. Lender consent is commonly needed for refinancing.
  • Will a foreclosure erase a lien? Foreclosure generally terminates junior liens (they may be wiped out by sale proceeds distribution) but can leave the borrower personally liable for any deficiency under state law.

Professional disclaimer

This article is educational and not legal or personalized financial advice. For decisions that affect title, foreclosure risk, or tax exposure, consult a qualified real estate attorney or tax professional.

Authoritative sources

(Information current as of 2025.)