You’ve saved up for years and are now ready to search for a house to call home. Before you begin, there’s one crucial thing you should know about - property liens.
Maybe you’ve even found the house of your dreams and are getting a mortgage when you discover that there’s a lien on the property. As PA’s highly-rated real estate lawyers, we reveal the essential things you should know about property liens when buying a home.
Understanding property liens
A property lien is a claim placed on a property to secure the payment of debt or obligation. It can be placed on a property by a lender or contractor, serving as collateral to ensure the property owner fulfills their financial obligation.
Liens allow an individual or institution holding the lien to claim or sell the property to repay the debt.
Types of property liens
Mortgage liens - are placed on a property when a homebuyer takes a mortgage to purchase a home. A mortgage lien allows the lender to foreclose on the property.
Tax liens - are placed when a homeowner doesn’t pay the required property taxes on a home. The IRS can place a tax lien, as do the state and local governments.
Mechanic's liens - Construction companies and builders can file this type of lien if the homeowner refuses to pay for work or materials used in the property.
Judgment liens - are placed as part of a court judgment. For example, if a homeowner fails to repay a debt to a creditor and is sued, the court can place a lien on the property to ensure payment.
How property liens affect you as a homebuyer
If you are considering buying a home with a lien, understand that the seller may have failed to pay taxes or be owing contractors.
A lien on the property may make it difficult for you to obtain title insurance. As a result, you will inherit all the liens on the property and be responsible for all unpaid debts. You will also be unable to secure financing as lenders will refuse to sign off on a loan for a house with a lien.
If you love the property and want to go ahead with the purchase, you can attempt to get rid of the liens on it. However, without the guidance of a real estate attorney, the process can be time-consuming, affecting your relocation plans.
Removing the lien on a property you are interested in
A lien on a house doesn’t mean you should automatically let it go. If you are interested in the property, there are some ways to resolve it.
You can negotiate a way for the seller to resolve the lien before closing the deal. For example, the seller can pay off the debt, enabling you to buy a lien-free house. The lien may also have been filed in error. In this case, the seller can get rid of it by contesting it in court.
You can also find out the amount of the lien and pay it off in exchange for a lower price. However, you should hire a real estate lawyer to protect your interest, as the seller is not obligated to sell to you after you resolve the lien.
Protecting your interests when buying a house
Remember, once you sign the closing documents, the home and all the accompanying liens are passed on to you!
Before making an offer, find out if there are any existing liens on the property with the help of a real estate attorney. If you discover property liens and want to proceed with the purchase, negotiate with the seller to resolve the lien before purchasing the house.
However, don’t forget to:
Work with a reliable PA real estate attorney
Buying a home can be overwhelming and confusing, even more so when buying a property with a lien. You could even end up on the short end of the stick.
That’s why it’s best to work with a reliable PA real estate attorney. They can guide you and help deal with issues that come up during the home-buying journey, making the process hassle-free for you. Call us at 724-458-9550 today to set up an appointment.