If you have ever purchased a property, then you likely have had a lien search conducted prior to closing. If you are a first-time home buyer, then it is important to have a good understanding of what liens on a house are. For starters, what is a lien? A lien is a legal claim against property that secures the payment of a debt. If you owe money to someone, they may be able to place a lien on your property. Technically, a lien is a right to keep possession of property belonging to another person until a debt owed by that person is discharged.
When buying a home, it is typical to have a title search performed on the subject property to ensure that there are no liens that could potentially delay the transaction. In fact, it has been estimated that 11% of transaction delays are caused by unresolved title-related issues on a property. Of course, liens can be placed on real property like a house or personal property like a vehicle.
Types of liens
There are two main types of liens, voluntary and involuntary. With this said, there are various categories of involuntary liens:
- Voluntary lien: This is created when you agree to give someone a lien on your property. This is often done when you take out a mortgage or a home equity loan.
- Involuntary lien: This type is placed on your property without your consent. This can happen if you don’t pay your property taxes, or if you’re sued and the court awards a judgment against you. There are a few different situations where an involuntary lien may be used:
- Judgement lien: In the event that a debt is not paid, the person or entity that is owed the money may file a suit and the court may place a lien on the property. The lien could also be placed on other personal items and property that is acquired later.
- Mechanic’s lien: If a bill is not paid to a contractor after work has been performed on the home, they may file a mechanic’s lien.
- Tax lien: If a property owner still owes income or property tax, the local, state, or federal government can put a lien on the home.
Who can place a lien?
In all cases, county court judgements are required to place the lien on a property’s title. With this said, liens may be filed against a property by various entities as mentioned above. Of course, not all liens are created equal when it comes to their priority in line for repayment. If there are multiple liens on a given property, we typically see the priority of these liens as follows:
- #1. Federal government/IRS liens
- #2. Florida state or local counties’ departments of Revenue.
- #3. Debts owed to contractors for work performed on the home.
- #4. Debts owed to homeowner’s associations along with applicable penalties, fees, and fines.
Of course, this is not an exhaustive list of priorities for liens. In fact, any unpaid debt could result in a suit and ultimate lien on a property.
In closing, checking for and successfully closing out liens is critical to the home buying and home selling process. If you are a home buyer, it is important to have a reputable real estate agent and/or closing agent that will do a thorough job of inspecting a home’s title. In addition to any potential liens, you will also want to ensure that any open permits are closed out as well. As a property owner and home seller, it is important that you ensure that there are no existing liens on your property prior to listing it for sale. If there are, you will want to pay off or negotiate these liens to close them out prior to listing your home for sale.
Are you thinking about buying or selling a home in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search app for your smartphone or tablet!