Property liens may be a familiar concept to many who have purchased or sold a home. For new homebuyers, liens are an important factor to understand. Here, the real estate experts at Powerhouse Title Group explain property liens, and how they affect your real estate purchase experience.
What is a lien?
A lien is a public notice attached to a piece of property that secures payment of debt to a creditor, and filed with the county or state records office. While commonly used for real estate, it is also sometimes used on other private property, like automobiles and sea vessels.
How Does a Lien on My Property Affect Me?
In order to sell or refinance a piece of property, you must have a clear title. When a lien is placed on your property, it makes your title “unclear,” and paying off the lien is the only way to rid yourself of that debt. The establishment of liens ensures to creditors that they will receive their money back in full. When you purchase a piece of property that has a lien on it, that debt will become your responsibility.
How are Liens Collected?
While creditors can force the sale of a piece of property on which they’ve placed a lien, they rarely do, because it is likely that the mortgage will have to continue to be paid by the creditor once they take possession of the property. Therefore, creditors tend to “wait out” a lien—once the owner desires to sell, they will have to pay off the lien.
How Can I Avoid Liens?
The best way to prevent a lien on your home is by paying your bills on time. If you fail to do so due to various circumstances, make efforts to negotiate with the bank, lender or creditor from whom you’ve taken a loan—they may be willing to change the terms of the loan, lessening the burden upon you for a specified amount of time.
If you are in the market to purchase a new home, always have a title check done on the property that interests you. If the title is unclear, but you still wish to purchase, it is important to understand the consequences of this decision: the lien will become your responsibility, unless the seller uses part of the proceeds of sale to pay it off. You may also be able to hold back a portion of the purchasing funds in order to cover the lien and interest.
How Can Powerhouse Title Group Help?
The real estate market can be intimidating, and there is no reason to navigate the purchase or sale of property alone. The dedicated experts at Powerhouse Title Group can help you understand and navigate the market, and to deal with any difficulties, like liens, that may arise. For more information, we urge you to contact us today!