What to Know About Property Lien Searches
Are you interested in how to find out if there is a lien on a home? Knowing how to check for liens on a house is essential. If you are looking to buy a new property, you need to be sure that there aren’t any legal problems with the purchase.
You don’t want to suddenly discover that there are debts against a property. This could leave you with an expensive bill to pay or legal issues, which will take time and money to resolve. Whether you are buying or selling a home nobody wants to go through the aggravation of dealing with a property lien.
These types of liens almost always take time and money to solve. Typically, they will involve hiring a real estate attorney to get them released in order for a transaction to take place.
So while you may have put down a significant down payment, before you proceed to the closing most of the time any outstanding liens will need to be cleared.
So don’t get those moving boxes together just yet. Let’s explore what you need to know if you encounter a lien on the house you’re dying to purchase.
What is a Property Lien?
When the owner of a property has failed to pay a debt, a legal claim can be filed against the home. This gives the creditors a way to recover the money owed to them.
A common type of lien is a mortgage which the homeowner takes out voluntarily. Unpaid bills can lead to an involuntary lien. The voluntary lien or mortgage isn’t ordinarily going to cause problems and won’t change the ability to transfer the title to a new owner. An involuntary lien could be an issue, however.
If a creditor has a claim on some of the value of the home, it could prevent the sale from happening as easily as normal. You may also find that the lien will be difficult to remove from the public record.
So, it is essential to understand there are two types of liens, voluntary and involuntary.
Some example of involuntary loans include the following:
- Unpaid real estate taxes
- An unpaid IRS tax bill, which is an income tax lien.
- A mechanics liens which is when you don’t pay someone who has done work to your home.
- A judgment lien in which a creditor is owed money.
- A divorce lien where is spouse is stopping a property sale.
All of these types of liens will impact either your ability to buy or sell a property. A homeowner will need to negotiate their removal or release in order to move forward with a real estate transaction.
Checking for a Property Lien
Finding out if there is a lien on a property is pretty straightforward. A lien has to be officially documented in the public records. You have a few options to do a lien search for these records, both online and in person.
The easiest way is to do a lien search is in real estate public records online. You can search in the assessor’s records or county register of deeds for the property you are interested in buying. Only the name and address of the current owner is necessary to find out if there is any information online.
It’s also an option to pay a visit to the local assessor’s office. This will allow you to ask for help from the staff if you need assistance with your search.
Help from a local title company will uncover any liens on the property, as well. They can also be helpful in other ways when purchasing a home. Checking for liens on a property is one of the things that a title company does.
The most common way, however, when you are not doing the lien search yourself will be from the attorney representing the bank. Whenever a mortgage is being given on any property, there is what’s called a title search done. The purpose of doing a title search is to make sure there are no blemishes on the title. A property lien would be considered one type of unclear title.
A lender is almost assuredly not going to provide financing for a home that has a lien placed against it.
Types of Property Liens Video
The video explains three types of broad liens that can be placed on a house including a consensual lien, statutory lien, and judgment lien. It is worth spending the two and a half minutes reviewing the information.
Removing a Lien
What will happen if there is a lien found in the records? If it is a voluntary or consensual lien, commonly a mortgage, this will be dealt with during the closing process during the transaction. The mortgage lien should be released at that point.
For involuntary liens, it depends on whether the debt has been repaid. If the lien has been satisfied, it should be removed shortly after closing. There can be some complications with this type of lien, however, depending on who they are issued by.
If they have been created by a government agency, like the IRS, you should receive a notification that the lien has been released when the debt has been repaid.
If you hear nothing within a couple of months after the payment should have been made, you will need to contact them to find out what is happening.
Here is what you need to know about a federal tax lien including instructions on how to get it removed by the IRS.
If the lien was on behalf of a business or other person, they may not realize that they need to release the lien on the property. This situation can be more difficult to resolve. If you have taken responsibility for the lien, you may need to make the final payment contingent on the lien release being signed.
For the lien to be removed from the records, the county will need to be given a lien release which has been notarized. This will mean that a meeting at your bank could be necessary, for payment of funds, and to have the release notarized.
For larger businesses, this may not be possible, though they are more likely to have a process for dealing with these situations.
Understanding how to remove a lien from a home with be paramount to having a successful closing.
Title Insurance Coverage
A lender which is giving you a mortgage will normally require that you pay title insurance to cover disputes. This could be useful if an undiscovered lien causes problems in the future, however, it will normally only protect the lender and not you. This kind of insurance is what’s referred to as a “lender’s title insurance policy.”
Extra insurance is available to buyers to provide the same protection offered to lenders. They call this an owner’s title insurance policy.
While there will have already been a search performed for a property lien, it is still possible that other liens could exist. There could also have been errors made when transferring the property and other problems like undisclosed heirs or even fraud.
Even if you do your best to find any problems in the title of the house, something could appear unexpectedly. The seller of the home may not even have known about a lien on the property, or perhaps they weren’t being as honest as they should have been.
Either way, you could be in for a nasty surprise if a lien suddenly appears on the title of your home. The title insurance policy whether lenders or owners are issued only after a thorough title search has been conducted by the title company.
Title insurance is not like most insurance policies. Most insurance policies are purchased to protect you against future issues. For example, you purchase car insurance to cover damages and losses in potential accidents. Title insurance, on the other hand, protects you against past circumstances that have nothing to do with your purchase.
It should be noted that is some states including Massachusetts, you can get homestead protection that protects the equity in your house against creditors including liens they may place on your property. The homestead protection, however, does not apply to debts that were acquired before the lien was placed. See the article for a full description of the coverage and exactly what the protection will do for you as a home buyer.When buying a home it is incredibly prudent to purchase your own title insurance policy!Click To Tweet
Final Thoughts on Checking For Property Liens
Whether you decide to search for properties liens yourself before entering into a contract or rely on the professionals during the transaction, understanding them is essential.
A property lien is not something that should be taken lightly. It is very possible they could delay your sale and wreck havoc on your plans on closing by a certain date. Make sure you understand all the ramifications of a property lien as part of your due diligence. Consult with an attorney and use their expertise in this matter.
Hopefully, you have found this information useful on how to find out if there is a lien on a house.
Other Valuable Maximum Real Estate Exposure Media
Get more helpful guidance on various topics that come up in real estate sales.
- What to know about buying land – one of the more complex types of real estate purchases is buying land. There is an incredible amount of due diligence that needs to be done before you close on a piece of land. The financing of land is also different than when buying a home. See some of the many considerations you should understand before committing to buying land. When purchasing land it will also be vital to check for any liens as well.
- What to know about iBuyers – have you heard the term “iBuyer” and wondered what it meant? An iBuyer is generally considered a larger company that buys properties with the intent of doing minor modifications and re-selling them for a profit. They are different from house flippers in that they buy homes in excellent condition. There are a number of pros and cons for a seller when it comes to iBuyer companies. Learn how they work in this insightful article.
- Flat fee MLS explained – do you want to sell your home without a Realtor involved but want to make sure the property appears in MLS. Years ago that was not possible but that is no longer the case. You can get your home listed in the multiple listing service for a flat fee. This type of real estate transaction is referred to as entry only. See all of the pros and cons to going with a flat fee MLS broker.
Use all of these additional resources to make the best decisions when buying or selling your next home.
About the author: The above Real Estate information about how to search for a property lien was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 33+ years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.