Real estate transactions often involve hundreds of thousands of dollars and mountains of paperwork. There is practically an entire language of real estate jargon you have to learn to communicate effectively when selling or buying property.
The better you understand what affects a real estate transaction, the easier it will be for you to address issues as they arise. Liens are often a major concern in a real estate transaction. There are three things you need to know about liens if there are any found on the title for the property involved.
1) Liens represent unpaid debt
Liens on real estate titles come in many different sizes and formats. The most common liens are primary and secondary liens secured by lenders who finance real estate transactions. Some people have liens on a property due to unpaid taxes.
It is also possible for those who work on the construction or improvement of a building to request a mechanic’s lien if they do not get paid for their services or the materials they provide. Sometimes, even government insurance agencies, hospitals and private creditors go to court to ask for liens against real estate. A lien will stay on title until the creditor receives full repayment.
2) You have to pay the lien to transfer title
If a title search discovers an outstanding lien against the property, that does not necessarily mean the sale can’t go through. It just means you have to pay the lien as part of the transaction or before you complete it.
It is common practice for the first wire transfer in a real estate transaction to pay off the existing mortgage on the property. If the seller owes money to contractors or others who have liens, they will need to make arrangements to pay those liens in full as part of the sale or before the transaction moves forward.
3) You can remove some liens before the sale occurs
Human error can affect the accuracy of the title for your property. Someone working for the recorder’s office may have failed to update the records. It’s also possible that a creditor, already paid in full, never filed the paperwork to remove the lien.
If you have proof that the lien is not valid or that you paid it in full, you can initiate quiet title proceedings to have the courts remove the lien from the property so that the transaction can move forward. A title search early in the buying or selling process for residential or commercial real estate will help you detect liens before they slow down the closing and possibly complicate the transaction.