When putting in an offer on a home for sale and then applying for a loan, the best thing to do is to let a title company do a property title search to make sure there aren’t any bad liens on or against the property.
A lien is a notice attached to a property that lets people know that a creditor claims money is owed. A lien is typically a public record. It is generally filed with a county records office or with a state agency, such as the secretary of state. Liens on real estate are a common way for creditors to collect what they are owed. More importantly, a lien means that the home could be foreclosed on and taken by the lien holder. Again, a title search can say whether or not there is a lien levied against the property.
Examples of bad liens on a property:
- Mortgage – the current homeowner’s lender can foreclose on the property if payments are not made every month.
- Property Tax – placed on a home loan when property taxes are not paid and take priority over a mortgage lien.
- Judgment – a judge has placed a lien on the property after a creditor has successfully sued the current homeowner.
- Child Support – if child support has not been paid by the current owner the lien is placed.
- IRS -secures the government’s interest in the property when the tax debt is not paid.
A lien on a home is a legal claim against the property. It gives creditors a stake in the home and a way to collect debts owed to them. When getting a mortgage on a property, the lender will require a purchase of a lender’s title insurance policy, which protects their interests in the property should there ever be a dispute in the title. A policy of title insurance insures against defects in or liens or encumbrances on a party’s title to the property.
As a title company, much of our work can be done behind the scenes. The buyer may not even be aware that there may have been any title defects existing at all. They were simply taken care of before the closing.