In the world of residential and commercial real estate, liens are a fact of life. Liens can arise for any number of reasons and aren't always easy to shake. Worse, they can interfere with investment and occupancy plans with frightening speed. Since owner-occupant homeowners are usually in a position to receive foreclosure notices and other lien-related communication in a timely fashion, liens tend to produce greater headaches for landlords, commercial property managers and loan originators. Then again, owner-occupants can certainly be hit with liens that come without advance notice. Read on to learn more about lien alert tools that can take some of the sting out of this process.
What Is a Lien Alert Tool?
Like many new forms of financial protection, lien alert tools are a product of the Internet age. Offered by a number of private companies that specialize in loan management services and technology solutions for lenders, property managers and landowners, these vehicles are designed to monitor and report on the status of their users' real estate loans. To do so, lien alert tools scan mountains of real estate-related data on public and private databases to identify liens or monitor changes to them over time. Many of the organizations that offer lien alert tools also offer full-time loan management for part-time landlords.
Common Uses and Benefits
Lien alert tools are most often employed by small and medium-sized organizations that directly manage real estate portfolios or originate loans for prospective homeowners. Most use a combination of monitoring tools that work to uncover real-time changes in lien statuses or compile comprehensive reports that can determine whether a large portfolio of extant loans is worth its purchase price.
One-time lien alert tools may be used in place of a series of formal title searches on the pertinent properties. In other words, this specific type of lien alert may be useful as a "bulk" title search service that helps larger-scale organizations assess portfolios that may contain dozens or even hundreds of individual properties. On the other hand, ongoing lien alerts may be useful for organizations that manage such portfolios on a long-term basis or issue loans that have been secured by "at-risk" properties. Generally speaking, lien alert tools are more useful for organizations that deal with sub-prime or at-risk borrowers.
Specific Coverages
Although the precise mix of monitoring protocols may vary from tool to tool, lien alert tools generally watch out for the following types of liens, title defects and other issues:
- Back-tax judgments
- Upward interest rate spikes on adjustable rate mortgages
- Owner-initiated bankruptcy declarations
- New subordinate or senior liens
- MLS listings
- Shotgun mortgage initiation
Variations and Practical Implications
Lien alert tools have a number of practical implications for property managers and loan originators. For starters, they provide early indications of borrower distress and give lenders the option of offering refinancing or loan workouts. For subordinate lien-holders like home equity lenders, they offer a "head start" that enables lenders to take legal action to maximize the recovery of their financial interest in the event of default.
Although they're often used interchangeably, it's important to note that lien alert tools and title searches aren't functionally equivalent. Whereas lien alert tools can be used as risk-assessment vehicles for organizations that are used to accepting some degree of real estate-related uncertainty, title searches are designed to protect private landowners from lien-related issues for the duration of their tenure.
Searching for Adverse Liens
Lien alert tools aren’t the only way for creditors, property managers and real estate agents to locate residential and commercial real estate liens. At CourthouseDirect.com, we offer a unique adverse lien search tool that allows Texas-based users to search by county for a wide array of involuntary liens, including IRS liens, state tax liens, child support liens, hospital liens, mechanic’s liens, and abstracts of judgment. Our custom-built lien search tool lets customers tailor their search to the counties and criteria of their choice to find the documents they need right away – no wait required.
Lien search and alert tools provide lenders and managers with a quick and convenient way to locate the critical real estate-related data without sifting through piles of data, making them an essential part of the due diligence process for finance and real estate pros everywhere.
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