Follow these simple steps to find liens on a property and avoid getting surprised by a lien that can hold up or kill a deal.
Nobody likes surprises in the home buying process. Even worse are the kind that cost money, complicate a closing, or blow up a sale. At the top of this list is a lien on a property. The good news is that with a bit of due diligence, you can usually find liens on a property with ease.
What is a property lien?
In short, a property lien is a legal claim and public notice that the property owner owes someone money. The legal claim gives creditors some guarantee that they’ll receive compensation. There are two main types of liens, a voluntary lien and involuntary lien.
- A voluntary lien is contractual and consensual. A mortgage, or real estate lien, is a common type of voluntary lien. It often applies to second mortgages, too. In the case of an unpaid mortgage lien, the creditor can foreclose on the property to recoup the investment as the property was the collateral.
- An involuntary lien is a lien that a third party places on a property without the property owner’s consent. This type includes tax liens for failure to pay taxes, or a mechanic or construction lien for refusing to pay for completed home renovation work. Another example is a judgement lien, which a court may place for an outstanding debt. This lien must be paid prior to the sale of the property.
How to find liens on a property
Liens are a matter of public record. This means it’s generally easy to find out if a property has a lien on it.
The county recorder, clerk, or assessor’s office typically keeps public records. However, the exact method of finding a lien varies by locality. There are two primary ways to uncover a lien: do it yourself or hire a title search company.
- DIY: If you choose the DIY method, you’ll need to contact your local county recorder, clerk, or assessor’s office. Start with this state-by-state list of property assessors and go from there. Many municipalities allow access to such records online. Some municipalities require a written request, telephone call, or even an in-person visit. They may charge fees for a search or for copies of the records.
Is DIY worth it? If you plan to check for liens frequently, you may find it pays to learn the process and do it yourself. This is especially true if your local clerk offers an online search option.
- Hire a Pro: For those who prefer to hand off the job, a records search or title company will do the work for you. Hiring a professional to search for property liens offers peace of mind. A professional researcher knows exactly how to do a search, what to look for, and any quirks of the locality’s record keeping. A preliminary title search might cost around $75, but most title search companies charge at least $200. Every home sale requires a full title search (plus title insurance) and will usually include it in closing costs.
Is hiring a pro worth it? If you’re buying in an unfamiliar location or if you do lien searches infrequently, save time and frustration by paying a service to search for you. Likewise, if your clerk requires an in-person visit or charges a fee for searching, hiring a title company makes a lot of sense.
What happens when a property has a lien on it?
In order for a property to be sold, the title must be clear. A title is clear only once all liens have been resolved. That means that assuming the lien is valid, it must be paid off before the property changes hands. An unexpected lien can complicate the sales process. The seller will either have to pony up the cash to cover the lien, or the buyer will have to pay off the lien.
Whether you decide to do a lien search yourself or hand it off to a title company, you shouldn’t skip the step of looking for liens on a property. It’s best to have all the information about a property before making an offer or entering into a sale. It pays to be an informed buyer.