Take Note of Liens Before You Purchase Foreclosed Homes

by Donald Hanz on Foreclosures

Real estate agents cannot really be expected to be open about the issue of liens on a property and most information available online are hardly enlightening. While it is true that most liens are taken cared of even before you purchase foreclosed homes, mostly during the foreclosure stage, some of them remain to be carried on by the subsequent buyer. It is for this reason that it becomes important for you to find out whether the property you are about to purchase has any lien attached to it or not. If you are not careful, your purchase and investment can ultimately be affected.

Mortgage Liens

Usually, if the property was foreclosed by the lender, then you can breathe in a sigh of relief as you would not need to worry about the lien. This is because the lender has a choice to demand from the previous homeowner any such balance owed on the property but the latter would not have any claim on the property if the title of the property has already been validly been transferred to you.

If the lender chooses the property at a price lower than what he should have priced it at to recover his loss, then it is already his discretion. Ideally, too, foreclosure will have the effect of erasing all junior liens that may have been attached to the property subsequent to its foreclosure. This is because liens are given priority based on the order by which they were recorded.

However, the case is different if the home was foreclosed by a holder of the junior lien. In this case, all the superior liens would not be erased and will be transferred to the buyer’s or to its new owner’s responsibility. The problem with this is that superior liens are almost always substantial in amount and this means that you would have to pay for them on top of the purchase price. It becomes then more important to investigate the nature of lien or liens attached to the property before you purchase foreclosed homes.

Other Liens

There are other liens beside what were already mentioned. Mechanic’s liens are those pertaining to unpaid sewer works or other work made on the home. It is similar to a contractor’s lien in the sense that both are results of some work remaining unpaid by the owner despite them being rendered completely to the latter.

There is also a property tax lien which cannot be eliminated until fully paid. This is true even if the property has already been transferred numerous times. The reason is because taxes are considered the most superior of liens since they constitute an obligation to the state. So before you purchase foreclosed homes, make sure that you are well aware of any lien that may still be attached to the property. If you need further help in understanding these liens and their possible effects on your purchase, do not hesitate to consult an attorney.

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