Does Medicaid penalize for the selling of personal property that has a lien against it?

The lien is taken care of at time of closing. Usually, its paid out of the sellers proceeds unless some other agreement with buyer has been made. The house has to sell for Market Value. Proceeds will be used for Moms care. The spend down starts all over.

You may want to consult with a Medicaid lawyer.

I think that real estate with a lien on it might not close - unless the lien was paid off, maybe by the buyer? A number of posters on this forum should be able to advise.  But money from the sale, after costs, would need to be spent on her care.