Monday, June 5, 2017 / by John Murdock -- CityScapeMetroGroup
What is a Lien???
One of the most common conditions that can slow down a real estate transaction is known as a lien. So what exactly is
What is a lien?
"A lien usually comes from either unpaid taxes, a judgment made in court, or from unpaid bills," explains Jocelyn Nager, a lawyer who specializes in debt collection.
Liens filed against a property could include things like missed mortgage payments or any payments owed to contractors for work done on the home.
Types of liens
There are a number of
lien: When general contractors, carpenters, plumbers, painters, or other typeof repair companies work on your home, they may file a mechanic’s lien on the property as insurance to make sure they’re paid.
lien: If you have lost a court case and there was a judgment against you, the winning party of the lawsuit can file a judgment lien against your home until the payment is collected. This type of lien is also sometimes imposed by an attorney if you do not pay your bill for legal services.
- Tax lien: If you do not pay your federal, state, or county taxes, the government may file a tax lien on your home.
How does a lien affect a real estate transaction?
Once a home is put under contract, the title company will perform a search for any liens that have been filed against the property. Simply put, finding
Mortgage companies will not agree to finance a property until the lien is satisfied, or paid off, which is the responsibility of the seller. In most cases, this will encourage the seller to take quick action toward resolving the debts. However, the seller could also refuse to pay or want to contest the lien. If this happens, the sale must be put off until a definitive outcome can be reached.
If a seller refuses to pay the lien, the buyer has two options. Since the refusal can be viewed as a breach of contract, the buyer has the right to walk away from the sale without losing his or her earnest money deposit. Or the buyer can accept financial responsibility for any liens in order to move the transaction along.
In a cash transaction, the buyer and the seller are free to come to a resolution on their own.
What to do if your property has a lien
The first step is for the sellers to determine if the lien genuinely belongs to them. Because these holds are searched for by name, sometimes multiple matches will pop up. Family members who share similar names or those whose names are unusually common might find themselves asked about
If, however, you're the seller and the lien is
If you're the buyer purchasing a home in foreclosure or a sale at auction, it's possible that you will have to pay off any lingering debts. That's why it's critical for buyers to be aware of what they're getting into before bidding on one of these properties. While they might seem like a better deal