How to Check for Liens On An Investment Property

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19 Apr How to Check for Liens On An Investment Property

When navigating the real estate market, you'll want to be most informed about the properties that interest you. This includes running a "background check" on all properties that catch your eye. Part of the process is learning how to check for liens on a property. Once you answer this question, you'll have greater insight into the property's history and any potential roadblocks to closing the purchase.

Today, we'll explain everything you need to know about liens and how they can affect your current and future investments. Read on to learn more.

What Is a Lien?

A lien is a legal claim on a property. It usually refers to one that a party has on another party's property because that first party is owed money.

Liens are either voluntary or involuntary. Voluntary liens are those that the property owner agrees to, like a mortgage. However, involuntary liens are placed on a property by someone other than the owner, usually without the owner’s consent.

Legal concept meaning Liens with sign on the sheet

A creditor can place many different types of liens on a property. Each type of lien is placed for a specific reason, and each has its own set of rules and regulations. Here are a few of the most common types of liens against a property.

Mechanic's Liens

When a property owner hires a contractor to do work on their property, they have a "mechanic's lien" placed on the property. This protects the contractor if the owner doesn't pay for their work. In such an event, the contractor can request a lien on the property until they are paid in full, or another agreement is reached. 

Tax Liens

A tax lien is placed on a property by the government when the owner owes taxes, whether income tax, property tax, or some other type of tax. If the owner doesn't pay their taxes after repeated failed attempts to collect, the government can place a lien on the property and ultimately take ownership of it.

Judgment Liens

After a debtor defaults on his financial obligations to a creditor, the latter may take the debtor to court and obtain a judgment against him. If the debtor doesn't pay per the ruling, the creditor can place a judgment lien on the debtor's property. 

What Does a Lien Mean for an Investment Property?

Following our description above, when a property has a lien, another party has a legal claim to the property. For you, as an investor, this could mean a few different things. Most importantly, if you're ready to buy a property with a lien against it, be prepared for legal challenges and potentially higher upfront costs.

  • First, the lien will likely decrease the property value.

  • Second, you may have difficulty financing the purchase, as most lenders will not issue a loan on an investment property with a lien. 

  • Finally, the lienholder will have certain rights that could interfere with your plans for the property.

However, not all real estate investments with liens will result in a negative outcome. In some cases, a lien could increase the investment property's value—depending on the type of lien and the market conditions.

Should An Investor Look Into Properties With Liens?

As with most things in real estate investing, the answer to the question above is that it depends. Each situation is unique, and a real estate investor must weigh the pros and cons of investing in a property with a lien on it. 

In some cases, you may be able to get the property at a discount if the owner is motivated to sell quickly. In other instances, you'd have to pay off the lien yourself—which may or may not be worth it. When in doubt, it's always a good idea to consult with a real estate attorney or other professional to get their opinion on the matter.

How Can You Find Out if a Property Has a Lien?

A lien can get in the way of passive real estate investing. At the end of the day, real estate investors want to make money when buying, and a lien can be a significant obstacle to real estate investing success.

A row of coins on a small house model and a law auction hammer

How can investors find out if a property has a lien? Work with your real estate agent to:

  • Reach out to a title company (or connect with the title company on your real estate investing team). They can be very resourceful in finding out about liens for a specific property. 

  • Research through the county clerk or assessor websites. Using the name of the property’s owner and the address, investors can access critical records. 

If these websites don’t deliver the information you need, it can help to visit the county clerk’s office in person (or send your real estate agent in your place). 

Find the Best Properties Online With Privy

Learning how to get into real estate investing or handle a lien doesn't have to be difficult. Now that you know more about liens and how to check for them, you're ready to start looking for real estate investment properties!

Privy is here to help you find the best properties that fit your goals and budget. With our powerful search engine and investor insights, you'll be sure to find the perfect property in no time. Reach out to learn more about how it works!

Use more of our expert insights to build success when downloading a free copy of “How To Invest In Real Estate: A Guide.”

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