What Are Liens And Should You Worry About Them?
When you purchase or sell a home, one thing your real estate attorney, title company, or closing company will do is check to see whether there are any liens on the property. But what are liens, and why do you have to worry about them?
Liens on Your Property
A lien is put on your home by a creditor that tells the world that the creditor has to be paid before you are, if you are selling your home. The common example is a mortgage—you probably already know and accept the fact that if you have an outstanding mortgage, the buyer’s purchase money will be applied to the mortgage lien first before you realize any money (the money you do realize after all liens are paid, is called your “equity” in the home).
When put on your home, a lien is recorded in the public records, so everyone knows they are there when you sell your property. With some exceptions, the liens that are recorded earliest get paid first from the proceeds of the sale of your home.
But a mortgage lien is voluntary—you agreed to have the money paid to the lender (the bank) before you get paid, or agreed that the lender could foreclose if you did not pay.
Many liens, however, are involuntary. They can be assessed against your home, whether you like it or not. Creditors who get judgments against you can put liens on your home until you pay them. Government agencies who are owed taxes, or to whom you may owe fines (such as with code violations) may be able to lien your home for the taxes that are owed. Construction workers who are not paid can lien your home when they do work that isn’t paid.
Foreclosing on Liens
Many people get confused, because some liens can be foreclosed on, and some can’t. Your mortgage company (the lender for your home) can foreclose on you because you have signed a mortgage. The same is true for homeowners associations, condominium associations, some construction liens, and some government taxes or fines.
Other liens cannot be foreclosed on—that is, they can’t take your house from you to pay what you owe them.
Still, these liens have to be paid when you sell your house. If you owe enough, it can make it impossible to sell your property. For example, if you owe creditors and government agencies so much money that your home has no equity, and is “upside down,” you may not be able to sell your home.
Some companies do put liens on your property that are unenforceable. People do make mistakes and lien the wrong home, property, or debtor. You may have paid a judgment you owed many years ago, but it still shows as a lien in the public record.
These lien challenges may have to be dealt with, so the liens can be removed, so that you realize the maximum profit from the sale of your property.
Do you have a real estate closing and need legal help? We can help. Contact the Tampa real estate transaction lawyers at the Gilbert Garcia Law Group, P.A.