A title check is normally conducted when a property is transferred from seller to buyer. This is done for the purpose of issuing title insurance, as well as giving buyers the opportunity to ensure that the seller has the legal right to sell the home. Title searches will also show the existence of liens.
If you want to sell your house, you can find out if there are any liens on it. The question is whether you can sell your home if there are any unpaid liens on title.
A lien is a claim made against your property for money owed to a creditor. When your house is sold, anyone who has a lien on it is legally entitled to the money owed. This is to insure the creditor has a guarantee that they will be repaid. Liens are common in real estate and are attached to the property rather than the homeowner.
Mortgages are regarded as liens, but voluntary liens. Mortgages are used by homeowners to fund the purchase of a new home, and the mortgage note associated with the property serves as collateral for the loan. The lender retains legal possession of the home with a voluntary lien in the form of a mortgage until the mortgage is completely repaid.
These forms of liens do not need to be addressed when selling a home, unless the amount owed exceeds the value of the house. When selling in this situation, the lien will have to be discussed with the lender.
Conversely, involuntary liens are those levied on the property by someone other than the homeowner, usually a creditor or the court. Tax liens and development liens are two of the most common forms of involuntary liens.
If you owe money on your property taxes, a tax lien will be imposed on your title before the money is repaid. These forms of liens should be dealt with as soon as possible because they can not only make it more difficult to sell your house, but they can also damage your credit score.
A building lien is normally filed on a home if any work done on it has not been paid off in full. Subcontractors are often hired by builders to complete portions of the work required by the homeowner.
Even if the homeowner pays the contractor's quoted amount, any subcontractors who are not paid by the original contractor can put a lien on your home before they receive their rightfully owed funds.
While you might attempt to have the original contractor pay off the lien, it will stay on title until it is paid off.
Other involuntary liens exist, but they are much less common. For example, judgment liens are tacked onto the title of a home to protect money associated with a court judgment, and child support liens are levied if a parent fails to pay child support.
When a house has a lien on it, it is possible to advertise it for sale on the market. However, in order for the buyer to gain clear title to the land, the lien must be paid at the closing of escrow.
There are a number of closing costs associated with selling a property, and any unpaid liens are usually added to the list. If the property has enough equity, the lien may be paid off with the proceeds of the sale.
However, if you owe more on your mortgage than the value of your house, or if there is little money left over from the selling the home to pay the lien, you will have to figure out way to pay the lien on your own. If not, you could be forced to sell your home in a short sale.
There may be occasions where a property with a lien may be sold "as is." However, this type of situation is not easy and can only be considered with the assistance of a seasoned real estate specialist who is familiar with dealing with real estate transactions involving liens on title.
Most buyers expect all liens to be paid off before the transfer of title, so finding a buyer willing to take possession of a home with a lien on it would be incredibly difficult.
Liens are a less than ideal situation that can appear during a title search at the time of closing. Most buyers would refuse to purchase a house with a lien on it until the lien has been cleared. They will not only refuse to bear the costs, but they will also find it difficult to obtain a mortgage from a lender for a property with a lien on title.
If you have a lien on your house, work with a seasoned real estate agent who knows how to handle these sometimes difficult circumstances. Although it may still be possible to sell your home if there is a lien on title, you would be wise to resolve it before selling your property to maximize the chances of a smooth sale.