Are you trying to buy a property that has a lien against it? Or maybe you just want to learn more about liens on houses so you’re well prepared when it happens.
If you frequent probate sales, sheriff’s sales, or foreclosure auctions for your real estate investments, then you’ll probably encounter a lien or two along the way.
Fortunately, these aren’t always deal-breakers. Let’s break down where liens come from and what you can do about them.
What causes liens on houses?
Liens stem from unpaid debts and unmet financial obligations. When a homeowner fails to pay a bill or balance, a lien is placed against the property. The property then serves as the debt’s collateral until the debt is repaid.
Here are a few common reasons there might be a lien on a property:
- Unpaid taxes: If you fail to pay your income or property taxes, the IRS or county may issue a tax lien against the house.
- Owed child support: Unpaid child or spousal support, if ruled necessary by a court, can result in a property lien. These are called judgment or court liens.
- Unpaid credit card debt or medical bills: You may also see a lien if you fail to settle your credit card or medical debts.
- Unpaid home improvement invoices: Failing to pay your contractors or other home services professionals can result in what’s called a "mechanic’s lien" against the property.
You shouldn’t purchase a property with existing liens against it, as liens are tied to the property itself -- not the owner. That means the debts would become yours should you purchase the home.
If you’re purchasing a property directly from the seller, you can ask them to pay off the liens or bring the cash to cover them at closing. If you’re buying at a foreclosure auction or probate sale, they might be paid through the sale’s proceeds or, in some cases, you may have to pay the liens off yourself.
A quick note: Mortgage lenders won’t finance a purchase without a clear title, so unless you’re buying a home in all cash, it’s important all liens are settled before moving forward.
Is there a lien on a house you’re considering?
Want to make sure there aren’t any liens against a property you’re looking to buy? There are several ways you can do this.
First, contact your county clerk’s office. They may have a property search tool online, or you may have to call them up or visit them in person. Either way, liens are a matter of public record, and they should be able to give you data on any existing ones against the property in question.
You can also contact a local title company. These firms are well versed in digging up liens and other issues with property titles, so they can help you steer clear of any potential problems
The bottom line
Liens are more common on foreclosure properties and probate sales but don’t count yourself out if you buy your real estate the old fashioned way. Unforeseen liens can crop up on any property purchase if you’re not careful. Do your due diligence and thoroughly research any property you’re considering buying, and you should be safe.