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You have a mile-long list of things you need to do to get your home ready to sell. Cleaning, decluttering, and painting all make it to the top. But there’s another task that could be worth adding to the list — checking for property liens.
Debtors typically file a property lien, or a legal claim against a specific property, when a homeowner owes an outstanding balance. Some liens (such as mortgage loans) are voluntary, while other liens (such as tax assessments) are considered involuntary, meaning the lien is placed on the property against the owner’s will.
As the homeowner, you’re responsible for clearing property liens before you sell. Open liens could affect your home sale because a new owner would become responsible for the property debt if you transfer title without clearing the lien. Also, a title insurance company will exclude coverage for any liens that cloud, or negatively affect, the property’s title.
And since there’s a chance that you could have a lien on your home that doesn’t belong there — such as a mechanics lien for contractor work you’ve since paid for — it would be worthwhile to resolve these potential title issues before a buyer gets involved.
To learn about the process of finding property liens, including how to search for liens yourself, we spoke with two pros with field expertise in the matter:
Charity Murow is an Illinois-based senior underwriting counsel for Proper Title.
Rick Ruiz is a seasoned real estate agent and single family home (SFH) expert — working with over 70% more single family homes than the average Las Vegas agent.
Title search: How to check for property liens
A title search investigates a property’s ownership and may reveal the existence of what’s referred to as a cloud, or title inconsistency. This often unexpected discovery could throw a wrench into your home sale.
According to an August 2021 survey by the National Association of Realtors (NAR), title and deed issues account for 11% of delayed sales contracts. An early title search allows you to resolve complications ahead of time for a smoother sale.
Title insurance companies require a title search before issuing a policy, and a title examiner completes a full search before the sale of a home. According to title and escrow company Endpoint, a complete title search encompasses more than property liens, and may involve:
- Chain of title, or the historical transfer of title
- Outstanding liens on the property
- Errors, omissions, forgery, or fraud that could impact ownership
- Easements, encumbrances, abatements, and encroachments that affect ownership terms or use of the property
- Other title issues, such as a faulty survey
Browse public records for an informal lien check
If you aren’t planning to sell soon, but you’re curious about what liens you have on your property, you could opt for an informal public records lien search.
Search public records online
Depending on your county or local municipality, you may be able to search for public records without leaving your couch. In Las Vegas, for example, Ruiz explains how easy it can be to find property records online. “We’re a very open record state … You could literally go on our [county] website and pull up my deed.” And in areas like Clark County, Nevada, it’s free to search public records online.
Murow says that while homeowners may find it convenient to search an online portal, “there’s obviously no assurance that it’s a proper chain of title.” And online public records aren’t always as up to date as the databases that title companies can access. Citing the pandemic, Murow points out that “a lot of recorder’s offices were closed for a while, so there was a very large lag in recording.”
Delve into public records in person
You can also view public land documents, including recorded liens, by visiting the local records office, which often allow in-person searches. In the state of Maryland, for example, every county’s circuit court houses a Department of Land Records. While you can search the public records for a property within the county, you’ll do so on your own — clerks can’t perform a title search on your behalf.
Inquire with your local records office for office hours and search fees. In Maryland, it’s free to search and view a document, but the cost for a copy is $0.50 per page.
Hire a pro for a preliminary or abbreviated title search
Your local title representative may be willing to conduct a preliminary title search. Availability varies depending on your location and the individual title company. Ruiz says that title offices in his area will often provide a free preliminary title report to homeowners.
According to Murow, homeowners could also request an abbreviated search through a title company that offers the service. Called a tract search, the report shows taxes and recorded liens against a property. While the cost varies, you can expect to pay in the $150 range, depending on how much work is required.
For example, if the property is in a county that requires an in-person search, the cost would be higher. The tract search isn’t as comprehensive as a preliminary title search, but may be an option if your local title office doesn’t offer preliminary title reports directly to homeowners.
If you’re selling, consider hiring a professional title search company
If you’re planning to sell soon, Ruiz recommends hiring a professional to conduct a preliminary title search on your property rather than taking on the task yourself. That way, you can resolve unexpected liens before a buyer comes into the picture, which could put your home sale at risk.
Murow agrees. “Reviewing a chain of title is really a science, so I would recommend leaving it up to the professionals,” she says.
How a professional title search works
Murow emphasizes that title search procedures can vary depending on both your state and the title company working on your behalf. Since a single database for all property liens doesn’t exist, professional title researchers exhaust multiple sources to uncover potential title issues. At Proper Title in Illinois, Murow reveals that title researchers use specialized software to conduct three types of inquiries:
- Chain of title
- Taxes and assessments
- Name search for liens and judgments
Chain of title
Chain of title includes the examination of public records to determine whether another person or entity has prior ownership claims to a property. Examples include previous title transfers and property liens.
If the title search unearths discrepancies — for example, the person who signed the previous title transfer was not the owner of record — legal ownership of the current owner could be called into question. Another common chain of title discrepancy includes old liens, such as mortgages, that the homeowner paid off and the lender failed to release.
Taxes and assessments
Depending on your property’s location, you’re responsible as the homeowner for paying local taxes and assessments. When unpaid, this involuntary lien becomes a lien on the property. The title search determines the outstanding amount due, if any.
A public records search on a property itself doesn’t always uncover every title issue. With a name search, the title researcher investigates whether the current homeowner has any outstanding legal judgments, pending litigation, and other liens that could affect the property.
Unexpected lien on title? Here’s how to resolve it before you sell
According to Ruiz, previously paid off mortgage loans are the most common unexpected title liens that crop up. Old loans can show up on title if the lender doesn’t properly release its interest. To clear the lien, the lender typically records a deed of reconveyance after the homeowner pays off the debt.
“Many times, that [release] is not done properly, and it’s not until somebody goes to sell or someone goes to refinance that they find out that it wasn’t done properly,” Ruiz explains.
A settlement representative working on your behalf — which could be an attorney or escrow officer, depending on your state — will assist with clearing title liens for the purpose of obtaining title insurance. Here’s how you can resolve property liens with the help of a settlement rep:
If the lien isn’t valid
If the lien doesn’t belong to you or your property but the lienholder insists that you owe the debt, you may need to consult an attorney and take legal action.
If it’s a valid lien, and you haven’t paid off the debt
You’ll need to pay off the balance and obtain a lien release from the creditor prior to closing.
If you paid off the debt and have documentation to prove it
Give a copy to your settlement rep to review. In some cases, sufficient documentation of payment may be enough to obtain a clear title insurance policy. If not, you’ll need to contact the lienholder and obtain a lien release.
If you paid off the debt, but can’t prove it
What happens if you lose or misplace the payoff documentation and can’t reach the original lienholder? Depending on the situation, Murow says potential resolutions could include:
- Tracking down the original debtor to release the lien
- Reviewing the seller’s credit report that shows the lien has been paid and obtaining a signed affidavit from the seller
- Waiving a 20-year-old lien after the property has already been through multiple ownership transfers and refinances over the years
- Obtaining a hold harmless agreement from the last title company that insured the property
“We can get pretty creative in terms of how we can handle liens that weren’t properly recorded,” Murow explains.
Title searches aren’t 100% foolproof — that’s why title insurance exists
Professional title searchers and examiners aren’t faultless. Whether a clerk improperly indexed a lien in the local database or misspelled the owner’s name on a document, a valid lien could slip through during a title search. And that’s where title insurance steps in.
Title insurance protects the buyer (or lender, if a lender’s policy) from title issues that occur before the date of the policy, but crop up after the policy’s effective date. So if you buy a home and a year later someone claims that they had filed a recorded lien against the property before you bought it, title insurance is meant to protect you. However, any liens that occur after the title policy’s effective date — say you apply for a second mortgage after you close — won’t be covered by the title insurance policy.
And while overlooked title liens aren’t unheard of, they’re also not terribly common. “You see claims at a very low rate … But it does happen.” says Ruiz. Murow roughly estimates that out of Illinois title policies issued, 2% to 3% may receive a claim.
Your best bet: Hire a professional for the most accurate lien search
An unexpected property lien could throw a wrench in your home sale, so you’ll want to catch potential issues early. While the do-it-yourself lien search may be a convenient way to check for potential title issues, a professional examiner provides a more comprehensive look at your title situation.
- To sell your home with a clean title, you’ll need to clear any outstanding liens that are attached to the property.
- Property liens range from voluntary liens such as mortgage loans to involuntary liens such as mechanics liens and tax assessments.
- Depending on where you live, you can search for liens through a public online portal or in person at your local records office.
- Since liens can show up in multiple places, a professional title examination provides the most comprehensive search results.
- Title insurance is meant to protect the property owner (or mortgage lender) against title issues, including liens, that may have been missed during the title examiner’s search.
Header Image Source: (Sasun Bughdaryan / Unsplash)