Liens to watch - is a short list of what I consider not the most important, but also the ones the can “inflict” more injury on financial well-being.
MORTGAGE LIEN – a mortgage is always a
Mortgage lending is a business based on using a real property as collateral for a loan. I have pointed on my page "Liens" that any major purchase like motor vehicle or a boat will have similar traits.
The moment you sign the closing paperwork to buy the house, you give a promissory note and pledge your new home to the lender. That is about the biggest lien that you should be concerned with.
It creates a legal claim against that “mortgaged property," which must be paid either in the time established in contract or before that. If the property is sold during the life of the loan, the remaining amount has to be satisfied [paid] before property is released to the new buyer.
In case of payment default, a motor vehicle will be reclaimed via “repossession action” and a real estate property will have a “Foreclosure Process”
Let it be known - without going deep into it - that there are some states that follow the “Title Theory” which views things slightly different and do not call the collateral debt on a property a lien.
In my humble opinion if it is encumbered, no matter what you call, if it
prevents the transfer - be it by sale, gift or inheritance, it is still a “lien
to watch” ;-)
Other Important Liens To
DEFICIENCY BALANCE LIEN – when I borrower defaults on a “secured loan,” the lender can go after that asset to recover the moneys loaned.
Secured loans are those where the
lenders put a lien on the property to hedge themselves against a default. Most
major purchases like car, boats and homes will have a lien attached to it.
When a property has a lien on it – like a car or a mortgage, that lien is valid up to the very last payment scheduled. Naturally as times goes buy you pay more and more of the amount borrowed, and the “pay off amount” - as a rule - decreases. If you want to sell the property or if someone is to inherit it, the lender has to be paid up to the last penny.
Upon recovering the asset, let’s say a house, it will be auctioned off through a foreclosure. It is often that the sale will not be sufficient to pay the amount still owed. Many states allow the lender to issue a “deficiency lien.”
These liens can be “specific” or “general.”
a. Specific: if it against only one property and the lender cannot go against your other properties real or personal
b. General: the holder can come after your other properties – so it pays to be in the look out for these details because they can be after that “deficiency balance.”
TIP: This is "the" lien to watch for people considering selling their home through short sale or foreclosure - specially in "deficiency state" where the lender can seek a "deficiency judgment lien" against the seller's other assets.
However for people buying a short sale or foreclosed home it makes no difference. If you get the house, then, at that point, title will be “marketable” and “insurable” so nobody will come after you, the buyer!
TAX LIEN – this is perhaps the most dangerous amongst the liens to watch! The taxman does not go away unless his debt is satisfied [paid] and it will be paid before any other obligation brought against the property, including a mortgage lender.
WATER BILL LIEN – water is the only utility that can generate one of the liens to watch. This info is extremely valuable for those home owner rent or are considering to rent their property. Be watchful of this one.
LIEN -- this is of the most estrange liens to watch: It may happen when someone performs any kind of repair work on your home
and for some reason you end up with a payment dispute with that professional
less than what he/she was owed, that person can put a judgment on your home.
However it will have a certain time to expire and will become unenforceable after that lapse of time from origination
So it pays to be vigilant when hiring contractor and by all means, have a some kind of written agreement where it says that a “lien waver” will be give to you along the last payment.
TIP: HOA’s also can encumber your property, although it is not called a lien, I would put a big caution on this end.
JC Fagundes, Associate Broker
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Residential. Commercial. Investments.
Ph: 404 255 8655