Property Title Search:
5 TIPS IF YOU FIND A PROPERTY LIEN
Before you apply for a home loan, it’s a smart idea to do a property title search to make sure there are no liens against it. Or rather, that their are none of the wrong kinds of liens on/against the property. Outside of a mortgage, most of them are the wrong kind. What is a lien, exactly? It is a legal document saying that the owner owes money to the government, or possibly some other legal entity. More importantly, a lien means that the house could be foreclosed on, and taken by, the lien holder! At the very best, it means that whoever owns (or is paying on) the title to the home, also owes a debt. What is a lien? The exact legal definition isn’t as important as what a lien tells you about a property, and what it tells you is that the owner owes money on that property! A “good” lien would be a mortgage, something that simply means the homeowner is still paying off the home loan that he or she took out to buy the house. “Bad” liens include those placed there by judges and tax authorities. Technically speaking, the buyer isn’t supposed to be able to sell the home with the latter type of lien on it. But indebted homeowners sometimes “forget” that there is a lien against their home. (To be fair, some of them genuinely do not know.) If you buy a house with a lien on it, you will probably buy some bad debt along with the house (although you could think of it as a free “gift”…). This isn’t usually a problem: 99 times out of 100, a title search will tell you whether are not their have been liens levied against the property. This is one reasons to do a title search on any property for which you are seeking a loan. (Your own closing title company will probably do this as well–but you’ll save yourself time, money, and grief if you do it yourself first.) Once you have the title search out of the way, what should you do if you find one or more “bad liens” on the property? You have several options, which we have listed below.
Sources: https://www.movoto.com/ https://artesiantitle.com/
1. Determine What Kind(s) of Lien(s) Are On the Property A mortgage is a type of lien that allows the homeowner’s lending institution to foreclose on the the property if the owner doesn’t pay at the appointed time each month. Most other liens allow the lien holder to do the same thing. A property tax lien, for example, is placed on a home when property taxes have not been paid. This lien takes precedence even over a mortgage lien. That means that the holder can foreclose on a house even when owner still owes money to the bank. Many property tax liens are handled at auction, in much the same way collection agencies buy bad debt from credit card companies. The new owner can then foreclose on said home, if the owner does not pay back taxes plus a healthy interest fee. 2. Check to See if The Lien has Expired Most liens expire after a certain amount of time. This time often depends on the state of residence. Real estate liens in Florida, for example, last 10 years, while personal property liens in that state last for five. They can sometimes be resurrected, but usually are not. Most importantly for you the home buyer, it could be that the lien is listed, but is no longer effected. This is rare, but does happen. If you’re not sure about the information you’ve found with your property title search, talk to your real estate agent or the home’s title company. 3 Deal With It Like a Professional (Even If You Don’t Want To!) property title search Keep in mind that the seller may not even know anything about the lien! Unfortunate but all-too-often true. There are undoubtedly some people in the world who will try and get one over on you. But for the purposes of buying a home, it helps to give them the benefit of the doubt (you’re concerned about an effective outcome, not laying blame). Two cliche phrases that work here are, “Trust, but verify,” and “Stay classy” (the latter meant in a literal, non-sarcastic way). Double-check to see if there are any other issues with the property (it can be helpful to research the history of the property more thoroughly). 4. Use the Lien as Leverage During Negotiations Your first thought may be, “Well, I’ll just ask them to deduct the amount of the lien from the house. I’ll get a great deal on a home, and take care of the rest later!” You wouldn’t be the first person to look at the situation overly optimistically! But there are two big problems with this approach. The first is that so much of the situation is out of your control, that clearing up someone else’s debt issues will invariably be more difficult than you think. It can even with you losing the home! 5. Withdraw Your Offer There’s no shame in withdrawing your offer–especially if the other party is simply no help at all. The old saying “There are plenty of other fish in the sea,” applies to homes just like it applies to exes. And it’s still a buyer’s market all over the U.S. Bonus Tip: Forget Buying the Property–Buy the Lien Instead It’s risky, but you could just buy the lien from the current lien holder and come at it from that perspective. If the homeowner doesn’t pay off the lien, you can foreclose on the house! It’s not a sure situation, nor will everyone feel comfortable dong so. But it is a possibility. To do so, however, you will have to go to court. That’s still less expensive than paying full price for the house–assuming the current homeowner doesn’t (legally) fight back.