Both “lean” and “lien” can apply to a house, and neither are good things! Here is what they mean:
- Lean: “Be in or move in a sloping position” and “a deviation from the perpendicular”
- Lien: “A right to keep possession of property belonging to another person until a debt owed by that person is discharged”
Again, neither of these are good things! If your house has a “lean”, it might be falling over. If it has a “lien,” that means you owe a debt to somebody. The good news. . . both leans and liens can be fixed! This article discusses what a “lien” is in more detail, and how to fix it.
What is a lien?
A quick look above will give you the exact definition of a lien. But generally speaking, they’re public records stating that you owe someone some sum of money. Until you can pay them in full, they are using your house as an insurance policy to get their money.
We could write an entire book on liens, but let’s focus on what is important to you. There are two main types of liens – voluntary and involuntary. Voluntary liens are very common and mostly come in the form of a mortgage. These don’t have a detrimental impact on your ability to do things with your real estate; for the purpose of this article, we’ll focus on involuntary liens and their impact.
First off, it’s important to know involuntary liens have many different sub-types. The most usual sub-types fit into one of the three described below:
- A tax lien can be filed on your home by the government if you fail to pay income or property taxes until you’re able to catch back up on all delinquent payments.
- A mechanics lien is typically filed by a home improvement contractor who completed contracted work on your home but was never paid for the services. This gives them peace of mind that you will pay them back before you can do anything more with your home including selling it.
- A judgment lien is the final most common type of involuntary lien and it’s just how it sounds. This lien involves a court case (or judgment) and can be filed by your lawyer for lack of payment for their services; however, it’s more commonly filed by your opponent in court when you lose a case and owe them a sum of money. The lien remains on your home until your sum is paid in full.
How does having an involuntary lien on my home affect me?
Depending on your situation, you will be impacted by your liens in different ways. For instance, if you don’t plan on selling your home at any point in your life, your biggest concern would be your tax lien turning into a levy. This is where the IRS/government seizes your home to satisfy the accrued tax debt.
The more common scenario for homeowners is that they do want to sell their home at some point. In that case, liens can be severely limiting. Part of the home sales process is having a title company verify that the home has a clean title. This means it’s ready to transfer from one owner to another. If any liens are found during the title’s company search, the sale will be delayed, which commonly leads to the buyer backing out.
A mortgage lender will not give money to a buyer for a home that already has a lien on the home because it increases their lending risks. If the property already has a lien and they’re trying to impose a voluntary lien, the initial lien gets first claim on the property and the mortgage lender could suffer greatly if there are any delinquent payments in the future. It’s simply not worth it for them to take the risk. Without a mortgage, most buyers will not be able to afford to buy a home.
What can I do if I’m trying to sell my home?
Here are a few options if you find yourself in the above situation:
- Pay off the existing lien, clear the title, and sell your home.
- Argue the lien, which can take a lot of time/resources and result in your buyer backing out with no financial consequence to them.
- Sell your home to a cash buyer. In this scenario, the seller and buyer can negotiate their own arrangement because there is no mortgage lender involved. It’s not uncommon for the buyer to accept financial responsibility of the lien as part of the sale in these instances, which makes cash sales one of the quickest and easiest options.
Hopefully the information above helps you understand what liens are and how they impact the sale of your home. If you are reading this because you’re experiencing one of the above described situations, please reach out to us. We might be able to help – just click the green box to the side!