There’s a lot of terminology and lingo to learn when buying a new home. There are inspections and an appraisal, not to mention a series of processes before getting to escrow. It can be daunting to new (and even seasoned) home buyers. We enjoy helping our Nashville homebuyers navigate these steps, and recognize that during the process the unexpected can arise. Our experience can help relieve unnecessary stress.
One of these unexpected events is a home with a lien on it. This can sound more frightening than it is, and can make Nashville homebuyers anxious when this process is fairly simple to navigate.
So, what is a lien on a home?
A lien is simply a notice that money is owed on that property. It means that money is owed to a creditor and that the situation has not been dealt with by the property owner.
For example, say work was done on a home by a general contractor and the homeowner did not pay the contractor in full. After multiple attempts to contact the homeowner to settle the debt, the contractor takes legal action and requests a lien on the home for the amount owed.
It is of public record, and the property cannot be sold without satisfying the lien.
Types of liens
There are 3 common types of liens. They are:
- mechanics lien – (The example above is a mechanic’s lien.) This is a lien placed by someone who performed work or materials on a home to improve it.
- tax lien – Not paying federal, state or county taxes can lead to a tax lien on a home.
- judgement lien – Sometimes when court cases settle for payment, a lien is placed on the home until the settlement amount is paid in full.
Removing a lien
The easiest process is for the property owner to contact the creditor and make arrangements to pay the lien, perhaps in the form of installments. Once the property owner and creditor agree to terms, the creditor can remove the lien and the home’s title is clear again.
Satisfying a lien at closing
Another possibility is to have the lien satisfied at closing. The lien amount is added to the seller’s closing cost. It is not added in to the asking price, but will come out of the proceeds after the mortgage is paid.
How to find a lien
A lien is a public record, and it is possible for a potential homebuyer to find out the information through a title search. However, it is more common for homebuyers to purchase title insurance, which protects the homeowner against loss from liens or title defeats.
When homes turn up with a lien on them, homeowners often panic. Potential homebuyers start to worry they won’t be able to buy the home they love since homes must have a clear title before they can be sold.
However, removing the lien is a fairly simple process for the property owner to take care of prior to closing, or to work out as part of the closing.
Are you ready to search for your new Nashville home and want an experienced agent to help with the unexpected? Give us a call today – we’re happy to help you get started!
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