Your first impulse might be to say “Only my home mortgage,” but you could be mistaken. Your home could have a lien that you are not aware of.
Liens fall into four primary categories:
Mechanical liens: These could result from work you had done. Perhaps the contractor didn’t perform as promised and you refused to pay part or all of the bill. He or she could place a lien on your property with or without your knowledge. If you‘ve purchased new construction, the lien could stem from a subcontractor or materials supplier the builder failed to pay.
Tax liens: This could be from unpaid Federal, State, or local taxes, including property tax.
Judgment liens: These are liens authorized by the courts. They could stem from a lawsuit in which you refused to pay another party, unpaid child support payments, medical bills, or unpaid credit card debt. You may not have even been present at the hearing at which the lien was authorized – failure to appear often results in an automatic “loss.” Numerous people in past years have found themselves dealing with this unpleasantness over unpaid gym memberships – when they had unsuccessfully attempted to cancel.
Errors: You may find a lien on your property for a debt that was paid long ago. In one case we found that a mortgage that had been refinanced years earlier had never been cleared from the books. The original lender had been bought out by another bank and the records were in storage. It took several weeks to jump through all the hoops and get that lien released.
In other instances, the error could be simply that: an error.
Before you offer your home for sale, check to be sure there will be no surprise liens on the title when its time to go to closing.
It’s also a good idea to check the status of a home you’re considering for purchase.
Checking is easy…
In many states you can access records on line. Search by address with the county recorder, the county clerk, or the county assessor’s office. In other states you’ll have to visit those offices in person. Call ahead to learn where you should go to do your research.
You can also hire a title company to do the research for you. You’ll probably pay for a preliminary report, then be credited for it when your home is sold and you purchase the actual title insurance.
What if you find a lien?
If the lien has already been paid, you’ll need to contact the appropriate parties and get a lien release. If you have a lien release in your own files, simply take it to the recorder’s office so that it can be filed of record. Then, if closing is imminent, take proof of that to the title company.
If the lien against your property is legitimate, you’ll need to take steps to pay the related bill or to negotiate with the entity you owe.
Should the IRS have a lien, you may be able to negotiate a partial payment and a schedule of future payments in exchange for lifting the lien to let your sale proceed.
If your proceeds from the sale are enough to cover all outstanding liens, you can simply instruct the closer to pay them from your funds at closing.
Liens won’t go away without help…
The bottom line is that no attorney or title company will allow a sale to finalize unless the seller is able to provide a clear title – so the liens will have to be addressed.