When considering purchasing any property, it’s essential to know about any potential financial obligations that come with it. That includes a lien on a property – legal claims other entities may have against the house or land. Here’s what you need to know if you’re considering a home with a lien.
A lien is a legal claim against a property. Both individuals and businesses can place them. When a lien is on a property, the owner must pay the lienholder the amount specified before they can sell or borrow against the property. Not paying a lien can lead to foreclosure.
Liens come in two categories: voluntary and involuntary. The property owner places voluntary liens on their property to secure a loan. Creditors can place involuntary liens on a property without the owner’s permission. A tax lien is the most common involuntary lien. It is placed on a property when the owner owes the government money. Construction liens, mechanic’s liens, and HOA liens are also examples of involuntary liens.
A lien stays with the property and not the owner. Buyers must remember that the property’s legal and financial burdens transfer to the new owner upon purchase.
If there ever comes a time for you to sell, it could be challenging to market the property. Even though there may be interested buyers, they may want a discount since they will have to shoulder the lien once they own the property.
The third risk is that it can be difficult to refinance your home or get a home equity loan with outstanding liens. Liens are legal claims against your property that must be paid in full before you can sell or refinance the property. It will also negatively impact your credit score and remain on your credit report for up to ten years after filing.
Paying the outstanding debt in full or through a payment plan is the simplest way to remove a lien. Upon full settlement, the lienholder will release the lien, and your property will be free from the financial and legal burden. In some cases, you may be able to work out a deal with the lienholder to have the lien removed without paying the total amount owed. You can also dispute the lien if it isn’t valid.
Never take liens lightly. They can be a real headache for a property owner. However, if you think the lien isn’t supposed to be on your property, talking to a team of legal experts in real estate can help you understand your rights and the best course of action.
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