Recently, I was talking to a friend who was looking at purchasing a piece of property. He was nervous because it was going to be his first home and he asked me about liens and doing a property lien search.
His concern for liens against his property is valid – liens can hinder your ability to sell your property in the future, and can cost you a lot of money to resolve.
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How Do I Find Out if There Are Any Liens on a Property?
The answer is pretty straight forward. Liens are a matter of public record once recorded. To find if there are any liens, here are your options:
- Search the county recorder, clerk, or assessors office online. All you need is the name of the property owner, or its address. If your county does not have the data online, then:
- Visit the county recorder, clerk, or assessor’s office in person. Generally, you will find the people in these offices will be quite helpful, and can even give you pointers if you need help.
- Contact a title company. Title representatives can be extremely helpful in many ways . . . finding liens is one of them. I strongly advise having a good title rep as part of your investing team!
What is a Lien?
A lien is a legal claim against your property. It gives creditors a stake in your home, and a way to collect debts owed to them.
There are two types of liens that can be placed against a property. A Voluntary Lien is a lien the homeowner agrees to – like a mortgage. There is usually a contract involved to place the voluntary lien on the property and it does not negatively affect the property, its title or the homeowner’s ability to convey title.
An Involuntary Lien is typically placed on a property due to unpaid obligations like a tax bill or home improvement invoice.
While title can be conveyed without all liens being paid, most retail buyers will not purchase the property without clear title. Certainly no lender would approve the purchase.
If you are getting a mortgage on your property, your lender will require you to purchase a Lender’s Title Insurance Policy, which protects their interests in the property should there ever be a dispute in the title. It is important to note that a Lender’s policy ONLY protects the lender – the owner of the property is not protected. In order for an owner to be covered, they must purchase an Owner’s Title Insurance Policy.
The Title Insurance policy, Lender’s or Owner’s, only comes after a thorough Title Search performed by the Title Company. After the search is performed, a policy is written. The search should turn up any liens on the property, and the insurance policy protects against most liens not found, such as undisclosed heirs, errors or omissions in transferring deed, and forgeries.
Title Insurance is a little different from most insurance policies. Other types of insurance policies are purchased to protect you against future issues – you buy auto insurance to cover damages and losses in potential accidents. Title Insurance protects you against past instances that actually have nothing to do with you personally.
Make Property Search Part of Your Due Diligence
Clouds on title pop up unexpectedly. Many time, the cloud is a surprise to the seller – they may not have purchased title insurance when they bought the property. But not everyone is 100% honest all the time. The seller is trying to sell the property, so they may conveniently “forget” about those unpaid taxes. Trust but verify is the best course of action.
A quick search of the public records can give you the peace of mind you need.