How Liens on a Property Can Affect Your Home Closing
One of the reasons for a title search before closing is to discover and cure encumbrances on the property. According to the Washington Post, title companies report that about one-third of all home sales require extraordinary work to clear title. Among the many title problems that arise, the most manageable are liens. A lien is an enforceable right a third party holds that constrains the sale of the property. Common liens that turn up prior to a real estate closing include:
- Mechanic’s liens — Many sellers modify their homes prior to sale to make them more attractive to prospective buyers. The contractor places a lien on the home as a way of ensuring payment. After work is completed and payment rendered, the lien should be lifted, but sometimes the lien remains because of an oversight. In worst cases, disputes with the contractor result in homeowners not paying the bill.
- Liens for child support — Parents who are obliged to pay child support are subject to various enforcement measures, such as wage garnishment. The Division of Child Support Enforcement also has the authority to place liens on real estate when support payments are delinquent.
- Liens for delinquent taxes — County authorities can place liens on property for unpaid property taxes. If taxes accumulate, the county treasurer can order a sale of the property.
If your title search reveals a lien, you may still be able to complete the transaction but only if proceeds of the sale can satisfy the lien. The cost of a lien is not added to the selling price; it must come out of the seller’s profit. If there is not sufficient equity to cover the lien, the seller must pay out of pocket for the lien or the sale cannot proceed.
As long as a lien is discovered before closing, it should not be an issue for the buyer. However, if the sale goes through without discovering the lien, the buyer is in trouble. The debt is attached to the property, not the person of the seller, so in taking on the property, the buyer assumes the debt. This is a major reason to purchase title insurance. Most mortgage lenders require such insurance that will pay for liens you discover after the sale goes through.
Your home purchase is a huge investment. Protect it with reliable representation at your closing. Call Miller Law Group, P.C. today at 434-218-3987 or contact us online to make an appointment for a FREE consultation.