Real estate agents must be aware if properties they are selling are on the market because of adverse liens. Adverse liens on a property often change its resale value, and require the agent to take different steps than with a house with a clean title. If a property owner puts up a home as collateral for a loan or debt, and then either voluntarily or involuntarily sells that home, an adverse lien can complicate the transaction.
Types of Liens
There are two main types of liens: voluntary and involuntary. A voluntary lien is one agreed to by the homeowner. The property owner willingly takes an action that enables an entity to place a lien against the property, such as taking out a mortgage. An involuntary lien, or an adverse lien, is one an entity places on the property against the owner’s will. This may happen if the property owner owes money to someone and doesn’t pay. A tax collector, for example, has the power to place an involuntary lien on a property. If the owner still doesn’t pay his or her debt, the tax collection agency can sell the house and take the debt out of the sale’s proceeds.
Liens can be specific or general. A lien may also be attached to separate and multiple pieces of property at once. A specific lien attaches only to one property, while a general lien attaches to more than one property. There are a few main types of real estate liens you may encounter as a real estate agent:
- Tax lien. If a property owner fails to pay his or her real estate taxes, the government will place a tax lien on a property. This lien is involuntary and specific.
- Mortgage lien. This is the most common type of specific, voluntary real estate lien. When property owners borrow money to buy a piece of real estate, they voluntarily give the lender a lien.
- Mechanic’s lien. If a property owner hires workers for a project on the property but fails to pay for the job, an involuntary mechanic’s lien may be placed on the property.
- Judgment lien. This type of lien typically is the result of a court action against the property owner. Also known simply as judgments.
It’s important to understand the types of liens on a property to know which entity will get paid first from the sale of the property. This is called the priority of liens, and is in place to satisfy multiple debts to different entities.
How to Find Adverse Liens
To discover if a property has any adverse liens on it, you need to perform a lien search. You can do this in a number of ways, but the simplest and most cost-effective method is to do an online public records search. On an online search database, type in your county, enter search details, and view documents right online. You also can download the documents to your device or print them. A public records search can give you information about involuntary liens, including state tax liens, IRS liens, mechanic and material liens, abstracts of judgment, hospital liens, and child support liens.
A visit to the county recorder’s office is another way to research potential liens on a property. The local assessor or county clerk should be able to help. You also can contact a title company, because they have the ability to find liens on a property, and can help you locate other information you may need to sell the property.
Selling a House with a Lien
Once you have all of the information you need about the adverse liens on a property, you can do your job with more confidence and success. There are many property owners with liens against their properties in the current market. You need to be aware of which properties have adverse liens to know the true value of the property, and to be able to sell to interested buyers. Make an adverse lien search part of your everyday job to stay on top of your county’s housing market.