Property Lien Search

A Property Lien Search is an essential process in any real estate transaction. It provides comprehensive information about all liens attached to a property, including both voluntary liens (like mortgages) and involuntary liens (such as tax liens, judgments, and mechanic's liens). Conducting a thorough lien search ensures that any encumbrances affecting the property's title are identified and addressed before the property is transferred or refinanced. Typically, a lien search is part of an Owners and Encumbrances (O&E) Report, also known as a Title Search, which includes a detailed history of property ownership, changes in ownership rights, and any encumbrances that would appear in Schedule B of the title policy.

What Is a Lien Search and Why Is It Essential When Buying Property

A lien search involves examining public records to uncover any existing liens or legal claims against a property. It is crucial when buying or refinancing to ensure the property has a clear title free of encumbrances that could hinder the transaction. For example, if a borrower plans to refinance and the lien search reveals an IRS lien against them, this lien typically takes priority and must be resolved before a new mortgage can be recorded. Identifying such issues early allows for proper resolution, preventing delays or complications in the transaction.

Cost of a Lien Search: How to Conduct One Affordably

The cost of a lien search varies depending on the property's location and the complexity of the search. Generally, prices range from $50 to $150. To conduct a lien search affordably:

Shop Around: Compare prices from different title companies or online services.
Bundle Services: Some companies offer discounts if you combine the lien search with other services like title insurance.
DIY Approach: While not recommended due to complexity, you can access public records yourself to save on fees.

Balancing cost with thoroughness is essential to ensure all potential liens are identified.

Hidden Liens: How They Can Derail Your Real Estate Deal

Hidden liens, such as unrecorded municipal liens, permit violations, or code enforcement liens, can pose significant risks. These liens are often not recorded at the county level and may only be discovered through a municipal lien search conducted at the township or city offices. Failing to uncover these liens can lead to unexpected expenses or legal issues after the property purchase. Conducting a comprehensive lien search, including municipal records, is a mandatory step to ensure a safe and successful transaction.

Step-by-Step Guide to Conducting a Lien Search Yourself

While hiring professionals is advisable, you can perform a basic lien search yourself:

Visit the County Recorder's Office: Access deeds, mortgages, and liens recorded against the property.
Check Tax Assessor's Records: Verify property tax payments and identify any tax liens.
Search Court Records: Look for judgments or lawsuits that could result in liens.
Contact Municipal Offices: Inquire about any unrecorded municipal liens or code violations.
Review HOA/COA Records: Check for any homeowners or condominium association liens.

Note that this process can be time-consuming and may not uncover all hidden liens, especially unrecorded ones.

Professional Lien Search Services: Should You Hire an Expert

Given the complexity and potential risks, hiring an experienced professional or title company is highly recommended. Professionals have:

Expertise: Knowledge of local laws and procedures.
Access: Ability to search databases not readily available to the public.
Insurance: Coverage like Errors and Omissions (E&O) insurance to protect against mistakes.

Missing a significant lien can lead to legal disputes or financial loss, making professional services a valuable investment.

Types of Liens on Property and How to Identify Them

Various liens can attach to a property:

Mortgage Liens: Voluntary liens by lenders until the loan is paid off.
Tax Liens: Claims by government entities for unpaid taxes.
Judgment Liens: Resulting from lawsuits where the property owner owes damages.
Mechanic's Liens: Filed by contractors for unpaid work or materials.
HOA/COA Liens: For unpaid homeowners or condo association fees.

Identifying them requires thorough searches of public records, court documents, and sometimes direct inquiries with relevant agencies.

How Liens Affect Property Ownership and Your Risks

Liens can significantly impact property ownership by clouding the title and giving lienholders legal rights to the property. If liens are not properly addressed before closing, the new owner may be responsible for them, potentially leading to foreclosure or legal action. Ensuring all liens are identified and resolved is critical to securing a clear title and protecting your investment.

Tips to Avoid Issues with Liens When Purchasing a Home

Conduct a Comprehensive Lien Search: Don't skip this essential step.
Hire Reputable Professionals: Work with experienced title companies and real estate attorneys.
Review Closing Documents Carefully: Ensure all known liens are accounted for and will be paid off.
Purchase Title Insurance: Protects against future claims due to undiscovered liens.
Stay Informed: Understand the types of liens and their implications.

Legal Aspects of Lien Searches Every Buyer Should Know

Understanding the legal implications is crucial:

Priority of Liens: Some liens take precedence over others, affecting repayment order.
Responsibility for Liens: Buyers can inherit liens if not properly addressed.
Disclosure Requirements: Sellers are often legally required to disclose known liens.
Protection through Insurance: Title insurance can safeguard against legal defects in the title.

Hiring an insured and reputable company like ProTitleUSA ensures you have legal recourse in case of oversight.

The Importance of Lien Searches for Sellers

For sellers, a lien search helps:

Identify and Resolve Liens: Clear encumbrances before listing the property.
Prevent Deal Breakers: Avoid surprises that could derail the sale.
Facilitate a Smooth Transaction: Build trust with buyers by being proactive.
Ensure Accurate Pricing: Reflect any lien-related expenses in the property's price.

Addressing liens ahead of time can expedite the sale process and prevent legal issues.

Frequently Asked Questions About Property Lien Search

What happens if a lien is found after I purchase a property?

If a lien is discovered after the purchase, you may be responsible for satisfying it, which could involve significant costs. This situation highlights the importance of conducting a thorough lien search and obtaining title insurance to protect against undiscovered liens.

Can I buy a property with existing liens?

Yes, but it's risky. Purchasing a property with existing liens means you may inherit the obligations associated with those liens. It's crucial to understand the nature and amount of the liens and negotiate with the seller to address them before closing.

How long does a lien stay on a property?

The duration varies by lien type and jurisdiction. Some liens expire after a set period, while others remain until the debt is paid or legally removed. For example, tax liens may stay until satisfied, while judgment liens might expire after several years unless renewed.

What is the difference between a lien search and a title search?

A lien search focuses specifically on identifying liens against a property. In contrast, a title search is more comprehensive, examining the property's ownership history, easements, encroachments, and other encumbrances that could affect ownership rights.

How much does an Attorney Opinion Letter cost?

Do liens show up on credit reports?

Some liens, like tax liens or judgment liens, may appear on your credit report and negatively impact your credit score. However, changes in credit reporting laws have reduced the likelihood of liens appearing on credit reports.

Is title insurance necessary if a lien search is conducted?

Yes, title insurance is still advisable. While a lien search reduces the risk of undiscovered liens, title insurance provides financial protection against any title defects or liens that were not found during the search.

Can liens affect property refinancing?

Absolutely. Existing liens must be addressed before or during refinancing. Lenders typically require a clear title to secure their interest in the property, so unresolved liens can delay or prevent refinancing.