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 finding out about a lien on a house 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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Property Lien Search: How Do I Find Out if There Are Any Liens on a Property?
Wondering how to perform a property lien search? 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 assessor’s 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 they 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 on a House?
A lien on a house 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 a home improvement invoice, sometimes called a mechanic’s lien. These are the liens that affect your ability to sell a property easily — and also the more difficult to discharge from the public record.
When the lien on a house is paid off, the creditor has been satisfied. Their primary objective was to get paid, and once that is done, removing the lien may or may not be on their radar.
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.
How to Remove a Satisfied Lien
A voluntary lien on a house — like a mortgage — isn’t a cloud on title. The seller’s loan is paid off at the closing table, and the lien is released during the closing process.
Government holders of involuntary liens like tax or IRS liens should automatically send you a lien release once the debt has been paid. If you don’t receive one within 30-60 days of final payment, contact them to see when you can expect to receive it.
A mechanic’s lien holder or a child support lien holder may not be aware of their obligation to remove the lien or may be under the impression that it will automatically be removed. The best chance of having a lien release signed is before the final installment has been paid — that is, make the final installment contingent upon them signing a lien release.
Lien releases must be notarized in order for the county to accept them. With a smaller lien holder, meeting them at a bank to make the final payment will be easier than if you were dealing with a larger lien holder. Have your bank’s notarize the lien release, then make sure to submit to your county recorders office to have the lien removed from your property.
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, as well as 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 Lien Search Part of Your Due Diligence
Clouds on title pop up unexpectedly. Many times, the cloud is a surprise to the seller — they may not have purchased title insurance when they bought the property.
Depending on when the home was purchased, previous clouds could be missed even if the sellers did purchase title insurance when they bought the home — computerized county records are still fairly new.
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 property lien search can give you the peace of mind you need.
Have you performed a property lien search? What did that search tell you?
Let me know your comments and questions below!