A homeowner may be in a situation where they find that a lien is placed on their property. Unfortunately, a home lien can make it hard to refinance a home to afford a home or kitchen renovation, as well as hinder the sale of a home. The good news is that homeowners do have recourse in such situations. It is possible to have a legitimate lien removed and address old or inaccurate home liens. Learn more about home liens and when they are used by creditors and different entities today.
What Is a Home Lien?
Homeowners receive a notice when they owe money to a creditor and may be subject to an involuntary lien. The federal government, a mortgage lender and an individual with a legal interest in the home can have a lien placed on it. This lien becomes a matter of public record. A home lien can make it hard to refinance or sell a home.
In general, the mortgage on a home needs to be paid before the lien and a creditor will not force a foreclosure sale. Judgment liens, mechanic's liens and tax liens are a few different types of home liens. The IRS can place a tax lien, as can a contractor for unpaid work. Outstanding financial obligations need to be paid in order for the lien to be lifted. Other than an involuntary lien, a homeowner may choose to take out a voluntary lien with terms clearly stated in the lien contract.
What to Do About a Home Lien
A homeowner has a few ways to handle a lien. They may decide to pay off a legitimate home lien. Individuals who cannot pay off the full amount of the debt may be able to settle with a creditor and give them less than the entire amount owed. Some liens may be frivolous or need to be corrected. There are times, such as when there is a disagreement, when it may be necessary to go through legal action to address the issue.
Homeowners may also want to check whether a claim is still valid as some claims can expire. An expired claim may simply need to be brought to the attention of a specific individual to have it removed from the public records of a property. A homeowner may need to adjust their approach to the circumstances surrounding their particular home lien.
What Homebuyers and Investors Need to Know
Those who are looking to buy a home need to check to see if a home lien exists on the property. In most caes, the Escrow or Title company will do a search for liens as a part of the home buying and selling process. Existing liens can make it hard for a buyer to refinance and lead to delays in the home buying process. A home with a lien is considered to be encumbered. Public records may not show the latest status, and it may not be apparent that the owner has addressed the outstanding debt. A lending institution will often want to ensure that the lien has been paid and this can make lengthen the Nashville home buying process.
Investors do not want to incur unexpected debt. An IRS tax lien is not removed when a property is sold in an auction. Individuals checking for a property lien may:
- Request that the title company do a lien search;
- Visit the office of the county assessor; or
- Search online.
Websites for county tax offices can differ and some areas may not have a website. Call or visit an assessor's office to learn more about how their system operates. The other option of having a title search performed by a title company may be easier even though there is a minimal fee associated with it. A benefit of working with a title company is that it offers an individual a title commitment. The company becomes responsible for finding any lien on a property and clearing them. Potential buyers and investors should avoid purchasing a home with a quitclaim deed as they may then be responsible for the lien on a property.
Addressing a Home Lien
Homeowners subject to a home lien can take steps to have it removed. There are different types of liens and options for individuals, such as disputing a home lien, going through mediation, or settling with a creditor and paying a lower amount than originally owed. Homeowners do want to address a lien as not doing so can make it harder to make use of the equity in a home or list a home for sale. Not all home liens may be legitimate or still valid and homeowners and potential investors want to do their research on any home lien.
Speak with a reputable agent to learn more about selling or buying a home with an existing home lien.
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