So you’ve found out that a lien has been held against your property. Most likely, you’ve discovered this lien because you’ve been attempting to sell your house and the sale has suddenly been held up after a municipal lien search was conducted. This can greatly impede the closing process because a lien is actually a claim held against your property by a third party. Until your lien is removed, you will find it difficult if not impossible for you to sell your home.
Liens can in fact be removed or lifted, but the process isn’t easy. You’ll have to do a bit of work to ensure that your home is ready to be sold, and that work isn’t always very easy. But with that being said, lien search companies have made it easier than ever for people to find liens, and therefore this makes it a bit easier for homeowners to have their liens lifted. They simply first need to understand exactly what they’re dealing with. As such, we’re exploring the different types of liens, as well as how they should be handled so that your closing process can continue unimpeded.
1. Tax Liens
Tax liens are types of statutory liens, which means that the lien results from state and federal laws. These liens happen automatically, and as such, they’re technically involuntary. These liens in particular are often held against properties by the IRS after a property owner has failed to pay back taxes. Liens can be held as the result of income taxes being unpaid, but they can also be linked to unpaid real estate taxes. This is why it’s important to search on your property tax history before attempting to sell your property. As with many liens, a tax lien can be lifted through the settlement of the debt involved.
2. Home-buying Liens
A home-buying lien is a lien that typically comes in the form of a first mortgage, with the home being used as collateral. The bank is lent the first lien on the property, which means that the lien will stay on the home until the mortgage is paid off. The good thing about this type of lien is that it’s less likely to impede the closing process. This is because the payment provided by the new owner will usually fulfill the terms of the lien, and therefore the lien is lifted.
3. Mechanic’s Liens
A mechanic’s lien refers to a lien that can be put in place after a mechanic or contractor works on a property. If they work without being properly paid in full, they can file to have a lien placed against the property. Often, this will keep the homeowner from selling their home until after they have paid the contractor and the lien is lifted. Liens are much more serious violations than a code violation, like having weeds that are higher than 12 inches tall on a property’s lawns. They can stop a closing process in its tracks, especially if the lien in question is a mechanic’s lien.
4. Purchase-Money Security Lien
This type of lien falls under the category of consensual liens, which both parties agree to. When credit is used from a lender to buy property, the lien is a purchase-money security lie. These would include mortgages, car loans, and other purchases that involve a credit agreement.
5. Non-Purchase-Money Security Liens
These types of liens are quite different from typical purchase-money security liens. Rather than using credit, the lender will use property they own as security for buying. This is essentially the practice of using a property as collateral. A second mortgage or refinancing a mortgage is a good example of a non-purchase-money security lien.
6. Judgment Lien
When a judgment lien is placed on a property, it is literally placed by a judge and occurs due to a lawsuit. If a creditor wins a judgment in court, the lien will sometimes be placed against the property as a part of the judgment.
There are a lot of issues to consider as a homeowner when selling a property. But it’s extremely important to remember liens. If you know about a lien earlier and can resolve it before placing your home on the market, the closing process will be easier for you and the buyer.