When you’re buying a North County home, one of the steps of the closing process on your mortgage is to perform a title search. This is an examination of public records that confirms who is the legal owner of the property. It also uncovers whether or not there are any liens on the home. In order to close on your new home, a clean title is required. So what happens if your title search uncovers a lien against the home? Let’s take a closer look.
What is a lien?
First of all, let’s be clear about what a lien actually is. Basically, a lien is a legal claim against the house. A lien is claimed against a house when the owner owes money to a creditor. If the owner of the home does not pay the debt, then the creditor can take the home as payment.
Types of liens
There are two types of liens — voluntary and involuntary. Voluntary liens are those that are agreed to by the owner and include mortgages and home equity loans. However, involuntary liens are the type you need to be concerned about when you’re buying a home. They include:
- Property tax liens
- Federal tax liens
- Foreclosure liens
- Judgment liens for things like unpaid credit cards, personal loans, or medical bills
- Child support liens
- Mechanic’s liens for unpaid services from contractors
- Municipal liens for debt incurred to fix ordinance violations
Any home with a lien against it cannot be sold until the lien is paid.
Find out the amount of the lien
If you discover there is a lien against the home, then the next step is to determine how much is owed. This will help you to decide if you want to proceed with the sale or not. In some cases, the lien may have been placed in error. In these situations, the seller needs to work with the creditor to have the lien cleared before the sale can continue.
Devise a payment strategy
Buying a home with a lien against it can be difficult, but it is not impossible. And if you’ve found your dream home, then it may be worth it to explore ways to pay off the lien. Often, the seller can negotiate with the creditor to pay off the lien for less than the full amount. Other times, the seller will have enough equity in their home to pay off the lien at closing. Sometimes, however, the creditor remains steadfast and the seller will not have enough money or equity to pay off the lien. In this scenario, you may want to try buying the home as a short sale. This is an arrangement that allows the seller to sell for less than the remaining amount of the loan.
What are the risks?
It’s important to remember that liens stay with the property and not the person. So if you purchase a home with a lien via a short sale, you are assuming the debt. Homes with liens often have maintenance issues as well and may need expensive repairs. There are many things to consider when buying a home with a lien, so working with an expert real estate agent is a must.
Contact the Clark & Gilman Team today!
When you work with the Clark & Gilman Team, you can feel confident knowing you have an expert on your side to help negotiate even the trickiest deals. Contact us today at 760-758-1211 or [email protected] to get started.