The ultimate goal for home buyers purchasing a home with a mortgage is to ultimately pay off the home loan so they don’t owe anything on it, making the home 100% their property. Until the home loan is paid off, the mortgage provider has a claim to ownership of the property, which they can act on if the homeowner stops making their mortgage payments. It’s important for home buyers and sellers to be familiar with property liens when trying to buy or sell a home because a lien can add extra difficulties to a sale. Here is what everyone needs to know about property liens.
What Is a Property Lien?
A property lien, also known as a mortgage lien, is a legal claim over a property held by the person or lender with whom the home buyer’s mortgage is through. With a lien, the lender can take ownership over the property if the homeowner does not pay back their debts. A lender can use a property lien to take possession of the home and evict the buyer. When a property is repossessed, it’s done through a property lien. Liens can also be used on cars, motorcycles, boats, and other large purchases that someone would use a loan to purchase.
The Different Types of Liens
There are four main types of property liens that can be used: voluntary liens, involuntary liens, perfected liens, and unperfected liens. Here is the difference between each of them:
- Voluntary lien: This is a contract created by the lender and homeowner upon agreeing to take out a mortgage. This is the most common type of lien.
- Involuntary lien: These liens are most often for taxes and construction, but homeowners can encounter them if they take out a loan to do renovations on their home, such as adding a room or doing landscaping. They occur when the homeowner pays the contractor, but the contractor does not pay their subcontractors.
- Perfected and unperfected liens: If a lien has been filed with a filing agent, it is considered a perfected lien. This means the proof of the agreement is professionally filed away and can be referenced in case of the event that it needs to be pulled up later. On the other hand, an unperfected lien is not filed in this way.
These are the most common types of liens home buyers will encounter, but there are other types of liens that exist.
Selling a Home That Has a Lien
If a homeowner has a property lien on their home, they may think the best way to get out of it is by selling the property and starting fresh in a new home. It is possible to sell a home that has a lien on it, but the homeowner won’t be able to keep all the money they make from the sale. When a home with a lien is sold, the original mortgage lender gets to take the money they’re owed from the proceeds, and the seller is given whatever remains. Some real estate agents have expertise in selling homes with liens, so sellers should try to work with someone who is knowledgeable of the subject.
A lien can be a big problem when it comes to buying, selling, or just owning a Murfreesboro home. Homeowners should always try their best to avoid liens by making their mortgage payments on time.