Buying a home typically involves working with numerous professionals. People hire real estate agents and likely need a mortgage broker to help them obtain financing. They may need to hire surveyors, appraisers and inspectors to prove that the home meets the necessary standard for financing.
They also need to work with a title company to review the title history of the property, identify any issues and put together the closing documents for the transaction. Sometimes, the title review process uncovers an undisclosed lien against a property.
What do buyers need to know about liens that show up during real estate transactions?
There are three main types of liens
Numerous outside parties can obtain liens against a piece of real property. A lien is basically a claim against the title that prevents the owner from transferring their interest without paying a specific financial obligation.
Those who perform services helping to maintain the home may be eligible for a mechanic’s liens. If a property owner does not pay in full for the services provided by a professional, that professional should pursue a lien as a way of obtaining payment.
There are also tax liens obtained by state, federal and municipal authorities. In cases where individuals lose civil lawsuits, the courts may sometimes grant liens related to a judgment. For example, medical creditors might seek to place a lien against a patient’s house if they fall behind on making payments.
There are also mortgages that may turn up on the record of the property, which are large financial instruments secured by the property. The lenders may be able to seek possession of the home until the current owner pays what they owe in full.
What liens mean for a transaction
Buyers must address all issues with the title if they want a clear, protected right of ownership. Typically, funds from the transaction automatically pay off outstanding mortgages and liens before the buyer receives their funds from the sale. If an issue turns up that the seller did not previously acknowledge or account for, additional negotiating is sometimes necessary.
In most cases, liens are minor financial obligations that home sellers can resolve in full with the funds from the sale. In certain scenarios, they may need to address specific liens before closing as part of the title-clearing process.
Unpaid liens can cause headaches for buyers, and undisclosed liens can sometimes derail residential real estate transactions. Buyers who know what to expect, and who perform their due diligence by checking for liens, can increase their chances of a successful transaction.