What is a Lien on Property
A lien on property is, very basically, an amount of money owed to a creditor that’s backed by the equity in the house. This can be for many reasons, from a mortgage to a property lien that’s ordered through the courts for money that you owe.
Having a lien on property isn’t necessarily a bad thing, especially in the case of a voluntary lien. However, it gets a bit more complicated when you start looking at all the other types.
The following is a simple guide to help you understand more about what a lien on property is.
Property Lien 101: Everything you needed to know but were too afraid to ask
- Understanding the different types of liens on property
- What you need to know about a lien on property
Understanding the different types of liens on property
What is a lien on property…? Well, it’s a very broad term that covers a multitude of reasons why someone else, other than the person named on the deeds, owns collateral in the building. The most common kinds are:
- A mortgage lien: Easy to understand, this is a voluntary lien that you enter when purchasing a property. You make regular monthly repayments to gradually bring down the payments until the happy day that you end up mortgage-free (or you sell the house).
- An IRS tax lien: This is when the federal government files a debt for unpaid income tax against your property. If the taxes remain outstanding for an extended period, then the property can be foreclosed in order for the taxes to be claimed.
- A tax lien: If the house owner doesn’t pay the associated real estate taxes (and they increase substantially) then a sale can be enforced to recoup the money. Penalties and fees will also be recovered as well.
- Child support lien: As the name suggests, if a property owner fails to pay any court-ordered child support, then a lien can be drawn up by the court against the unpaid amount. Should it become too large, forced foreclosure can occur.
- Judgement lien: This is similar to a child support lien, in that it can only be actioned through a court order. If someone successfully sues you and you fail to pay, then the money can be claimed from your real estate assets. Again, if you fail to pay, the person who won the lien can force a foreclosure.
- Mechanics/material lien: If you have work carried out on your property or buy materials for a house project and fail to pay, a lien can be attached.
What you need to know about a lien on property
No matter what the type of lien on a property, it is a matter of public record. There’s only one way to remove a lien—to pay the amount owed. While it’s possible to sell a house with a lien, it’s somewhat complicated. The exceptions to this are a mortgage lien and a mechanics/material lien for a new build or renovation.
The other types of liens on property usually come with a cost to remove them—this is in addition to clearing the full amount awed. If you’re at all confused about the finer details of what is a lien on property, it’s advisable to take professional advice to ensure full disclosure and understanding.
Investment Opportunities can Arise from a Lien on Property. Find the Right Finance at BRRRR Loans
Many a wise property investment has been snapped up through the careful negotiation and purchase of a house with a lien attached. If you’re looking at buying real estate with the intention of either rehabbing and renting—or perhaps flipping a fixer-upper—then you’ll likely need to partner with a trusted lender. At BRRRR Loans, we offer a variety of different financing options, and we’re sure to have one to suit your needs.
Head across to https://www.brrrr.com for more info and call today to discover the art of the possible.
Buy, Rehab, Rent, Refinance, & Repeat. A nationwide direct lender to real estate investors. If you have a project that needs to be funded, you’ve come to the right place.