Property liens can come from multiple sources and bring a pending sale to an abrupt halt
No matter how close a sale is to closed, the discovery of an outstanding lien will bring the sale to a grinding halt. While most properties are unencumbered, liens can come from multiple sources, the three most common being the federal government, the courts system or disgruntled technician. Whatever the reason for the lien, ownership cannot be transferred from one party to another until a lien on the home or land has been resolved. To prevent such a burden from taking place, it’s important to understand what a lien is, the different types of common liens, and what you can do to navigate through the lien settlement process.
What is a lien?
A lien is a notice attached to your property stating that another creditor has a claim over your land or home because of an outstanding debt. It’s a public record filed with the county or state—depending on the type of property you own. While there are a number of different types of liens creditors can put in place, the most prominent include tax liens, mechanics’ liens, and judgement liens.
3 Common Property Liens
Loss of a court case with a judgement against you can result in a judgement lien. This may include child support, alimony, or other judgement-related lawsuits. The lien will be held against your property until the payment is fulfilled. This lien can also be inflicted by an attorney if legal services go unpaid.
The federal government will place a tax lien on a taxpayer’s property when the taxpayer fails to pay, and shows signs of being incapable of paying, the IRS. This type of lien takes precedence above all other creditor liens. Once a tax lien is in place, it can prevent them from receiving credit in the future and make it nearly impossible to sell their home. If the taxpayer fails to pay the full amount owed or reach a settlement with the IRS, the government can seize any assets owned by the taxpayer.
A mechanics’ lien is filed by a general contractor, plumber, worker, or other repair man when they work on a home. The lien held against the property will enact when the customer and property owner fails to pay for services provided. A mechanics’ lien secures the debt owed to the service provider and will help ensure they will be paid for their services. More on mechanics’ liens here.
How a lien can impact a real estate closing
When looking to sell or refinance your home, it must be proven that your home has a clear title. Having a lien on your home makes your title unclear, and thus, impossible to close on a sale. In order to clear the title, creditors must be paid the amount of debt attached to the property or have the debt settled in the court of law.
What to do if there’s a lien on your property
In the event that a lien is placed on a home you own or are trying to purchase, our real estate attorneys can help you find out details on any liens held against your owned or perspective future property, and take the steps to remove those encumbrances. Whether you’re a buyer or a seller, understanding liens, their implications, and how to navigate them is essential to your future real estate transaction. Call Anselmo Lindberg & Associates to have one of our real estate attorneys assist you in your next purchase or sale of property.