Property Liens: What They Are, How to Find Them, and What to Do Next

Uncovering the existence of liens on your property can be a surprising and inconvenient situation. Often, homeowners may not be aware of liens filed against their property until a crucial moment, such as when preparing to sell. This lack of awareness can lead to complications, causing delays or jeopardizing the entire selling process.

One common scenario where homeowners may be caught off guard is when purchasing a newly built home. If contractors or subcontractors were not compensated for their work, they

have the right to file liens on the property without notifying the homebuyer. This makes it crucial for property owners to be proactive in conducting a property lien search. Discovering whether a property has a lien is a straightforward process, and obtaining this information early on can help mitigate potential obstacles when selling the property. Here's a guide on how to determine if there's a lien on your property and how to perform a property lien search by address

Understanding Liens: Types and Implications

In simple terms, a lien is a legal notice attached to your property title due to an unpaid debt. It grants the unpaid party a legal claim to a portion of your property when it’s sold. You might encounter three primary types of liens on homes:

Mechanical/Contractor Liens: These arise when homeowners hire contractors for home improvement projects but fail to compensate them for their services and materials.
Tax Liens: Filed due to unpaid taxes, including local property taxes and IRS liens for missed federal tax payments.
Judgment Liens: Result from court cases where it’s ruled that you owe money to the other party, encompassing settlements related to child support, unpaid credit card debt, and medical bills.

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Conducting a Property Lien Search by Address

The good news is that liens are public records, making it relatively simple to determine if there’s one on your property or any other. In most states, you can perform a property lien search by address through the county recorder, clerk, or assessor’s office online. The search is typically free, with a small fee for obtaining a copy of the report.

While title companies can assist with this process, opting for a self-conducted search is advisable to avoid any last-minute surprises. It’s an essential step, especially when eyeing a property for purchase.

Responding to the Discovery of a Lien

If you uncover a lien on your property, there’s no need to panic. If the lien has been satisfied, you may just need to contact the relevant party with proof in the form of a lien release. However, if the lien remains unpaid, addressing this issue is crucial before proceeding with a home sale.

Liens can become problematic if their total amount exceeds the contract price. In such cases, sellers might need to bring additional cash to cover the difference at closing. If financial constraints arise, buyers may need to contribute their funds to clear the lien or reconsider the deal altogether.

For Sellers:

Transparency is Key: Disclosing any existing liens upfront fosters trust with potential buyers and avoids eleventh-hour surprises.
Factor in the Cost: Remember that liens reduce your net proceeds from the sale. Adjust your asking price accordingly to account for outstanding debts.

For Buyers:

Include a Lien Search Clause: This safeguards you from unforeseen encumbrances on the property and provides an escape hatch if necessary.
Partner with a Savvy Realtor: A knowledgeable real estate professional can guide you through the intricacies of lien searches and ensure you’re purchasing a property with a clean title.

The Takeaway: Knowledge is Power

Early awareness and proactive measures can prevent liens from hindering your home-selling process. Regular property lien searches and understanding the types of liens can help you navigate potential challenges and ensure a smoother transaction.

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