What is a Property Lien and How Can it Impact a Home Sale?
Finding a home with a property lien is one of the top reasons that home sales slow down or come to a halt altogether. In comparison to all offers made on homes, the number of sales that have hiccups and completely fall apart is relatively low. Regardless it is not out of the ordinary for a lien to be found on a home during the selling process.
What is a Property Lien?
Liens are most often the result of unpaid property taxes, missed mortgage payments, unpaid contractor work, or a judgment made in court. Payment of the lien will need to be made before the property can legally be purchased and put under the ownership of another party.
Common Types of Property Liens
There are countless different scenarios where a lien can be placed on a property but the most common liens when it comes to real estate include:
This is when a contractor such as a general contractor, plumber, electrician, painter, carpenter, landscaper, etc. performs work on your home and files a claim on the property to insure they are paid in full
If a homeowner finds themselves in a court battle and it ended with a judgment against them the other party that won the case has the ability to file a claim against the home until the entire amount of the judgment from the court case is paid. This can also be put on a home by an attorney to collect unpaid fees for their service.
If a homeowner has not paid state, federal, or county taxes the government is able to file a lien to receive payment for back taxes owed
How a Lien can Impact a Home Sale
When an offer has been made on a home and the homeowner has accepted that offer, if the buyer is planning to purchase the home with a mortgage, the lender will have a title search performed by the title company working to close the transaction. If a lien is found on the property this will temporarily put the sale on hold.
A mortgage company will not agree to lend money for the purchase of a home with an outstanding lien. They want to ensure that liens are paid or satisfied. this is the responsibility of the current legal homeowner. This is to encourage the seller to take quick action and pay the liens, but in some cases, a seller might refuse or contest the claim. In this case, the sale is put on hold for longer until a legally agreed-upon outcome is reached.
Related: Top Reasons Why Home Sales Fail in 2022
What can the buyer do if a seller won't pay a Lien?
If a homeowner trying to sell a home is refusing to pay a lien, the buyer does have some options. This refusal is seen as a breach of the purchase agreement contract and gives the buyer the right to back out of the purchase of the home without a negative impact or loss of money.
The buyer also has the option to take on the responsibility for the liens to keep the homebuying transaction moving.
If the home is being purchased with cash, both parties in the home sale transaction have the ability to come to an agreement on continuing with the sale on their own.
For more information on purchasing a home in southern Maryland please contact us any time.
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