Common Title Problems: The Hidden Liens That Could Derail Your Real Estate Deal
When buying or selling property, the last thing anyone wants is an unexpected issue that could derail the deal. One common problem that can arise during real estate transactions is hidden liens on the property. In this blog, we'll explore what liens are, how they can impact your transaction, and how title insurance can protect you from these hidden issues.
What is a Lien?
A lien is a legal claim or right against a property. It’s a way for creditors to ensure they get paid what they are owed. There are several types of liens, including:
Mortgage Liens: The lender’s claim against the property until the mortgage is paid off.
Tax Liens: Claims by the government for unpaid property taxes.
Mechanic’s Liens: Claims by contractors or suppliers who have not been paid for work performed on the property.
Judgment Liens: Court-ordered claims against the property as a result of a lawsuit.
Common Example: A Hidden Mechanic’s Lien
Imagine this scenario: You’re a buyer who has found the perfect home. You’ve agreed on a price, completed the home inspection, and are ready to close. However, during the final title search, your title company discovers a mechanic’s lien on the property. This lien was filed by a contractor who did renovation work for the previous owner but was never paid.
Impact on the Transaction
A hidden mechanic’s lien can cause significant problems:
Delay in Closing: The closing process can be delayed until the lien is resolved.
Financial Risk: As the new owner, you could be held responsible for paying off the lien if it’s not cleared before the transaction.
Legal Complications: You might face legal battles to clear the title, costing time and money.
How Title Insurance Protects You
This is where title insurance comes into play. Title insurance protects you from financial loss due to title defects, including hidden liens. Here’s how it helps:
Thorough Title Search: Title companies conduct comprehensive searches to uncover any existing liens or claims against the property.
Coverage for Losses: If a hidden lien is discovered after the purchase, your title insurance policy will cover the costs of resolving the issue.
Legal Defense: Title insurance provides legal support if you need to defend your ownership against claims.
For Example: Consider the case of John and Mary, who purchased their dream home only to discover a hidden tax lien after closing. The lien was from the previous owner’s unpaid property taxes. Thanks to their title insurance policy, John and Mary were able to resolve the lien without financial loss, and their title company handled the legal aspects, allowing them to enjoy their new home with peace of mind.
Conclusion Hidden liens can pose significant challenges during real estate transactions, but understanding these issues and having the right protection can make all the difference. Title insurance offers vital protection, ensuring that you can move forward with your real estate deals confidently and securely.
If you’re buying or selling property, don’t let hidden liens catch you off guard. Contact Marlena today to learn more about how title insurance can protect your investment and ensure a smooth, hassle-free transaction.