Buying a home in the Hudson Valley can be more challenging than you think. While you’ll certainly have to consider securing a mortgage at an affordable rate and beating out competing offers on a piece of property that you love, there are also legal issues that you’ll want to be aware of so that you can confront them head-on if they arise. Amongst them are liens, which can disrupt your ownership of the real estate in question.
What is a lien?
Essentially, a lien is an interest in a piece of property that arises out of unpaid debt. In other words, a creditor uses the property as collateral to secure outstanding debt. This is a legal claim that allows the lienholder to foreclose upon the property if the debt continues to go unpaid. This is a major encumbrance on a property, especially given that the lien stays with the property even if it’s sold to someone else. So, if you’re not careful and you buy a home that has a lien attached to it, then, at least theoretically, your home could wind up being subjected to foreclosure proceedings because the previous owner failed to make good on their debt obligations.
There are many types of liens, too. They can include HOA liens tied to unpaid HOA dues, mortgage liens created when mortgage obligations go unpaid, tax liens stemming from unpaid taxes, mechanics’ liens placed on property due to unpaid contractual terms and judgment liens stemming from a lawsuit against the homeowner. You need to be on the lookout for each of these as you navigate your home purchase.
How do liens affect a real estate transaction?
Fortunately, the situation mentioned above, where you secure a piece of real estate that you later find to have a lien against it, doesn’t happen very often. This is because the real estate transaction process is incredibly thorough. That said, if there is a lien on the property, then the closing process can be significantly delayed as you and the seller work to release the lien. In turn, this can result in additional and unexpected expenses. You’ll want to carefully consider whether those additional expenses are worth it before deciding to proceed with the deal.
Keep in mind, too, that many lenders won’t give you a mortgage if the intent is to use it to purchase a home with a lien attached. This makes sense given that the bank doesn’t want to lose out on profits to a lienholder. So, resolving a lien on the home in question becomes imperative if you want to move forward with closing the deal.
How can you minimize or eliminate the effect of liens on your real estate transaction?
Your first step is to complete a thorough title search. This should uncover any existing liens against the property. At that point you can try to negotiate with the lienholder, which may result in you paying to remove the lien. You can also try to negotiate resolution of the lien with the home seller, perhaps even getting them to commit to settling the lien. Once resolution is found, you need to double-check that the lien has actually been released.
Do you have questions about how a lien may affect your home purchase?
If you do, don’t hesitate to discuss the matter with your real estate attorney. These can be complex matters that, if inappropriately address, could upend what you expect to get out of the process. By educating yourself on liens and the real estate transaction process, as well as by securing the guidance you need, you may be able to resolve any lien issues you may be facing and secure the home that you’ve always wanted.