Types of Liens & Property Transfers
Types if Property Liens –
There are two basic categories of liens: voluntary liens and involuntary liens. As described in the aforementioned piece, voluntary liens are placed on a property’s title when the titleholder to a contract, typically to grant credit, and attaches a voluntary lien. Voluntary liens are often referred to as contractual or consent liens. In contrast, a forced lien is imposed by law without the owner’s prior consent or agreement.
Currently, there are a variety of voluntary and involuntary liens:
There are two types of voluntary liens: purchase-money security interests and non-purchase-money security interests.
A purchase-money security interest lien is when are when a creditor or financial institution finances the acquisition of real estate, this form of lien is created. The actual property serves as collateral for the debt. This sort of lien permits lenders to reclaim property purchased with credit funds. A primary home loan on a home and an auto loan are examples of this sort of lien.
A non-purchase money security interest lien is placed on an asset that the loan applicant already owns and will use as collateral. A second mortgage on a property is an example of this kind of lien.
Both forms of voluntary liens are typically non-possessive, meaning that the owner of the property retains custody of the collateral while paying off the debt. There are, however, certain sorts of voluntary liens in which the creditor does take charge of the property, such as pawn shops. Tax liens, judgment liens, technician’s liens, and support payments and alimony liens are all types of involuntary liens.
Property Tax Lien
A Tax Lien is placed on a property when the government has a legal claim against the assets or properties of an individual who has neglected to pay their taxes. Local, state, and federal governments can place a lien on the property to obtain the payment of delinquent property, income, and inheritance taxes. This is the final resource utilized to compel a taxpayer to pay delinquent taxes.
Priority is given to tax liens over any other liens or claims on a property, including mortgage lenders and even if placed later. If taxes are still not paid, the authorities may sell the home to cover the delinquent amount. In certain instances, the mortgage company will therefore assume the tax payment and add it to the mortgage. This enables their lien to take precedence over all others and ensures payments in the event of a sale.
A Judgement Lien is a form of involuntary or voluntary lien that is placed on your estate when you lose a case that requires you to pay the winning party money. It may be filed against a person or a business. This sort of lien grants the creditor access to the debtor’s professional, private, or real estate assets once he has won the litigation. A judgment lien gives the creditor access to the proceeds of the sale of the debtor’s property; it is a method of ensuring that the prevailing party receives what is owed.
In many places, the judgment must be recorded with the district or state recorder’s office by the judgment’s recipient. In many states, the judgment lien is automatically recorded against the property or properties. These forms of liens may be placed on property even if it was purchased after the court rendered a decision against the owner.
A Mechanic’s Lien is an involuntary lien utilized when work or materials for home improvement have not been paid for. As a result of the priority of mechanic’s liens over mortgage liens and trust deeds, a mortgage loan cannot be repaid until the worker or materials have been paid for. It is used to secure the contractor’s or supplier’s ownership of the property; if the proprietor tries to sell it, the debt will be reimbursed from the sales. In addition, when this sort of lien is attached to a property’s title, the sale of the property may be delayed or even prevented if the debt is not satisfied.
Subcontractors and suppliers frequently employ mechanic’s liens, and the fact that the proprietor has already compensated the contractor is irrelevant. If they failed to pay contractors or vendors, they may place a lien on your property to recover the money owed.
Child Support and Alimony
Liens for child support and alimony. Ex-spouses who have not been paid alimony and child support can establish a lien against their former spouse’s property. A property lien assures that if the individual who owes the funds ultimately becomes an owner of the property, they will eventually be required to pay and satisfy the debt owing to the spouse or kid.
What Occurs if You Wish to Purchase or Sell an Asset With a Lien on it?
If you are attempting to sell your estate and are aware, or discover throughout the process, that it is subject to a lien, you must disclose this fact to any prospective purchaser; it is overwhelmingly probable that the lien will be discovered prior to the closing. Based on the type of lien and the buyer, they may agree to purchase the property under specific terms. Nonetheless, the buyer or financing institution will typically refuse to finalize the sale until the lender issues a lien release.
Alternatively, if you are a buyer, acquiring a property with a debt linked to its title may have severe implications or none at all. You can use this as influence to negotiate a better price, but even if you consent to settle the lien’s obligation, there is no assurance you will be allowed to purchase the property.
Because other liens may well have precedence over the mortgage lien, lending institutions will not grant loans for the purchase of a home with a lien connected to its title. They cannot guarantee repayment of their funds. For instance, a tax lien on the estate takes precedence over the mortgage. Therefore, if a home is repossessed due to delinquent property taxes, the purchaser loses the property as well as the lender cannot typically force the lender to pay the mortgage until legal action is taken.
Unless you have expertise in the subject, it is challenging to predict the possible outcome. It is essential to work with a reliable real estate broker and a knowledgeable title business for this reason. If the properties you intend to purchase are ultimately worth the hassle, they can assist you in resolving all issues. Contact our escrow company if you need help purchasing a property with a lien.