The last thing you want to find out when you try to sell your home is that there’s a lien on the property. Fortunately, you can find out easily if this is the case.
Don’t assume that you know what liens are on your property. Sure, you know there’s a mortgage lien, but are you aware if any others were placed on your property without you realizing it? Tax liens and mechanic’s liens are just a couple of examples. You don’t always know if someone slaps your property with a lien. Fortunately, they are public record and easy to uncover.
Use the steps below to find out and then rectify the situation quickly.
First, let’s define liens. They are unpaid debts. The creditor is claiming a financial piece of your property before it can exchange hands. In other words, you can’t sell your property until you clear the lien. You can clear it before you close (sell the home) or with the proceeds of the sale. Either way, lienholders receive payment before you.
Finding Out if You Have a Lien on Your Property
With the help of the internet, you can quickly determine if you have any liens on your property. All you need is the website of your county recorder or assessor and the property address. You enter the address in their search bar and see what comes up.
If you don’t want to search online or your county hasn’t offered that service yet, you can also go to the courthouse. You can typically view the reports free of charge. If you want your own copy, however, you may have to pay a small fee.
The Types of Liens
If you come across a lien on your property, it will likely be one of the following:
- Mechanical Lien – If you had any work done on your home but didn’t pay the contractor or a contractor didn’t pay a subcontractor, you may have a lien on your home
- Judgment – If you were involved in a court case and were obligated to pay fees but didn’t, the winning party could put a judgment lien on your home
- Tax lien – If you owe any taxes, whether property or income taxes, the IRS or your county could put a lien on your home
- Mortgage lien – If you have any mortgages outstanding on your property, there will be a mortgage lien, but you will pay that off with the proceeds of the sale
Does it Matter if you Find a Lien?
If you have any liens aside from a mortgage lien, yes it does matter. Most lenders won’t provide funding if there’s a lien on your property. In fact, most buyers won’t buy the home anyway. Liens transfer with the property, not the person.
For example, if you have a judgment lien on your home for $20,000 and you sell the home without anyone realizing it, the new owners now owe the $20,000.
Of course, in real life, this wouldn’t happen. Lenders require a title search on the property. The title search ensures that you own the home without any liens, with the exception of your current mortgage.
If you do have liens on the property, you must take care of them before you sell. If you already paid the debt, provide proof to the reporting party and the county. You can secure a lien release and as long as the county recorder records it, you will be free to sell the home.
If you haven’t already paid the debt, you’ll need to do so before you can sell the home. If you don’t have the funds to do so, you may be able to clear the lien with the proceeds of the home’s sale. Just know that the sale’s proceeds pay off all property liens before they give you any money.
Being proactive and finding out if there are any liens on your property before you sell is important. It gives you time to take the right steps to get things in order. In a perfect world, you’ll take care of the issues before you list the home. If you don’t, expect the closing to be a bit delayed and more complicated as the closing agent handles the issue.