A lien is an action taken by a creditor in which it insures that a debt will be satisfied from the sale of a property. The property is considered collateral until the loan can be repaid. There are several types of liens that can be taken out against your property. The lien amount is expected to be settled from the payment of selling the property. But how do these liens affect you as a property seller?
First, it is important to understand that liens can be imposed both voluntarily and involuntarily. Voluntary liens are taken out on a property by the homeowner or are agreed upon by both the lender and borrower. For example, a mortgage lien is a voluntary lien in which the homeowner agrees to offer the property as collateral in case the mortgage is not repaid. These lien types generally do not complicate the selling process.
Involuntary liens, however, might be cause for some concern. They are liens taken against a property without the homeowner's consent. HOA's for example may take out a lien due to missed HOA dues. Similarly, contractors who have done work on the property may seek a lien to ensure they will receive payment for the completed work (referred to as a construction lien.) Judgments awarded by the court can also be issued in the form of an involuntary lien.
It is important to inform your real estate agent of any liens that have been issued against your property from the beginning of the transaction. The more liens on the property the more complex the sale becomes. If the liens are not settled, the short sale will not close. Full disclosure to your agent will allow them ample opportunity to negotiate with creditors on your behalf. They cannot settle liens that they do not know about.
Each case is different so it is difficult to say exactly how a lien will effect your short sale. Contact RE/MAX Exclusive Collection to discuss your options as a property seller.