How to Investigate Liens on Foreclosed Homes
All homes should have liens investigated before they are purchased. When buying a home traditionally the mortgage company will require this as part of the process. This is not always the case when purchasing a foreclosed home. It is wise to conduct your own check for liens before purchasing a foreclosed property.
What is a Lien?
A lien is a legal claim on a property that states there is a debt or a non-monetary interest in the property. Liens are most often recorded through the county clerk at the county courthouse of which the property is located.
What Liens You Should Look For
The following liens should be searched for when considering the purchase of a foreclosed property.
Easements- Utility companies hold easement rights on many properties, this allows them access to a portion of the property without permission for the purpose of utility line access, maintenance, or construction. These easements rarely if ever drop off when a property is sold. Property owners also have the ability to grant an easement to third parties to access the land, this type of easement most often ends with the sale of the property.
Judgments- This is a court order formally stating the amount of unpaid debt the current property has with the lending bank including interest legal fees and court costs. Judgments are recorded with the county clerk in the county the property is located to ensure proceeds from the sale go to the proper place. The current property owner is required to pay the judgment before transferring the property title. In some states, unpaid judgment liens may be wiped out in the foreclosure process.
Mortgages- There is of course the first mortgage on a foreclosed home, but some foreclosed properties may have a second or third mortgage on them. These are sometimes referred to as junior liens. Usually, property sellers will pay these mortgage balances from the sale proceeds and the liens are removed.
Real Property Taxes- Property taxes are a lien on real property and may not always show up in a title search. A home can be foreclosed upon for failure to pay the property taxes alone. It is wise to contact local taxing authorities and assessors to determine if the property taxes are up to date. The current owner of a property is the one held responsible for paying any back taxes. To avoid tax foreclosure the current owner must pay all outstanding property tax when taking ownership.
Unpaid Federal and State Income Taxes- state governments have the right to file a lien against properties for unpaid income taxes. The current property owner should pay of these liens before transferring the title.
This is not a long list of possible liens that can come upon a foreclosed property, but they can accumulate to a large sum of money a buyer did not expect to pay. When purchasing a foreclosed home it is a great idea to do a title search and to work with an experienced real estate agent to help navigate all of the things you may not be prepared for.
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