Fighting Real Estate Liens

Real estate has its vicissitudes. One bump in the road for sellers or buyers is the discovery of a lien on a property. I have seen cases where imposed liens kill a deal, and other cases where the lien is dismissed, only delaying the deal by a few days. However, knowing the details of liens is only half the battle.

-What a lien does
A lien is an ownership interest filed against a property for a bill that you didn't pay in full. In fact, your mortgage is a lien on a property until it is paid. The lien grants the company an interest and the right to foreclose on property for non-payment.

Credit cards you defaulted on, tax bills you didn't pay to the IRS, back child support, unpaid student loans or even unpaid contractors are just some of the entities granted permissions to file a lien against your home. When you attempt to sell or refinance your home, all liens must be cleared (paid) before you can transfer title to a new buyer, satisfying that all other claims of ownership associated with you (the seller) are clear. When selling, the fee for lien is often deducted out of your net proceeds.

-What this does to a transaction
If the lien does belong to the seller and it is so substantial that there is not enough money in his net proceeds to pay it, the transaction it typically means a death sentence to the transaction. If there is enough money and the lien does belong to the seller, paying it and validating the lien being cleared only delays the transaction a few days. If the lien does not belong to the seller and the seller files an affidavit against the lienholder, validating that it does not belong to him, this process will normally delay a transaction by several weeks.

-If the lien is yours, it's not a surprise when you sell
Before a creditor, a contractor, a child support office or even the IRS files a lien against your property, they have to obtain a court order to do it. The court requires that you be notified of this action via service from the county constable or certified mail. It's that simple. There is no way a lien will pop up on your closing statement without you being aware it exists.

-Sometimes, the liens aren't yours
In San Antonio, for example, when an escrow officer would do a title search on a seller whose name was something along the lines of Robert Ramirez, a thousand different liens surface, because it was a common name. The escrow officer would search through those and sometimes find a lien with a seller's name and address on it, but one that the seller insisted did not belong to them. In these cases, the seller must sign an affidavit that must be validated by the courts before the transaction can continue. This is a long and arduous process, and one few buyers are willing to wait for.

In my professional opinion, if you are concerned about liens on your property, contact a local title company and ask about the fees associated with a title search before you put your house on the market. This will reveal pending liens, saving you them embarrassment of having to clear liens when your home is under contract.

More from this Contributor:
How to Clear an IRS Lien from Your Property when Refinancing
Real Estate: Buyer's Agency
It Doesn't Matter How Much You Have