Liens are designed for lenders to ensure that home buyers are more likely to make payments in a timely manner and do not default on them. If a debtor fails to pay the lender, the lender may sue the debtor, resulting in a lien on the property. If the homeowner should wish to sell the home, this can cause issues. In this case, a skilled and experienced real estate lawyer may be your best resource.
Why Liens Matter
Liens are attached to the property, meaning that if a debtor should transfer ownership to another party, the debt does not follow them. However, liens are present on the property title. Before a real estate closing, a mortgage company will require a title search. Should outstanding liens appear on the property, it is likely that the mortgage company will refuse to finance the purchase. Additionally, the lender who owns the lien can seize the home as long as the lien is valid. This may mean that the new homeowner must pay off the previous owner’s debt to keep the property. Most people will not want to take that risk, so selling a home with a lien may be very difficult.
Paying Off The Lien
If you are selling a home that has a lien on it, it is best to repay the debt before selling. Once the lien is paid off, the lien holder will issue a Certificate of Release. This acknowledges that the lien is no longer valid, as the debt has been paid. Upon receiving the certificate, the debtor files it with the Secretary of State’s office. The lien will no longer appear in title searches once this document has been filed, making it easier to sell your home.
Sometimes, the homeowner will choose to wait until the lien expires instead of paying it off if it is financially easier. There are several types of liens, and they expire at different times. Federal tax liens are valid for ten years, after which a homeowner can request a Certificate of Release. A judgment lien will expire once the original judgment expires, but a creditor could renew a judgment before its expiration. Therefore, relying on the lien to expire is not always a good idea.
Mortgage liens are different than other liens. Should an individual sell the home before paying off the mortgage, the proceeds of the sale will go to paying off the original mortgage, should the house sell for more than the owner owes. Mortgage liens do show up in title searches, but do not count against the homeowner and would not complicate the sale process the way other liens would.
If there is a lien on your property and you intend to sell it, you have a couple of options. Typically, a debtor must pay off the judgment lien before it is removed, but a lender may voluntarily remove the lien if the debtor offers collateral or sets up a payment plan. For federal tax liens, the IRS will allow debtors to apply for a lien release when trying to sell your home, if the individual submits their application at least 45 days before the sale of the home. This will release the lien on the home, but remains on other property, and the individual will still owe the debt.
At The De Bruin Law Firm, we have experienced real estate lawyers you may be able to help you with your questions about liens and other real estate issues. Contact us today to learn more about our real estate lawyer services.