First off…what is a lien??? Well, a lien is a right to keep possession of property belonging to another person until a debt owed by that person is discharged. What this all means in laymen’s terms is that if you don’t pay what you agreed to pay, per the terms of whatever contract you have established (i.e. – mortgage, service contract, etc.)…”they” have the right to come for your home –or– otherwise limit your ownership rights with said home.
1 : PROPERTY TAX LIEN
If you don’t pay your property taxes, the government WILL take your property from you. So, if you are planning to sell your house, go ahead and add whatever amount you owe in back property taxes to the total sales price of your place…because that’s what it will take for the sale to actually have a shot at closing.
2 : MORTGAGE LIEN
This one is pretty common. The mortgage you obtained to finance the purchase of your house is inherently a lien. So, obviously, if you opt to sell your house, you will have to pay back the bank all the money you borrowed (plus any interest, fees, and penalties). And, speaking of penalties, watch out! Some mortgages have an “early payment penalty.” This would mean that, for example, if you pay off your 30-year mortgage in year 8…you will be penalized with an additional fee, separate to those that were mentioned above.
3 : MECHANIC’S LIEN
Pause. This doesn’t literally refer exclusively to mechanics (although it would apply, if a mechanic was indeed involved). A mechanic’s lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. What this means: If somebody works on your house and you don’t pay them…when you go to sell, they can demand (and will receive) payment from the proceeds from your sale, equal the amount owed, per your original service contract.
4 : VENDEE’S LIEN
What if you sell your house to someone….but, somebody else comes a week later and wants to give you $25,000 more! Forget that first person, right?!? WROOONG! The original buyer (with whom you have already entered into contract) has the legal right to secure a vendee’s lien, thus preventing you from selling the property to anyone but him/her.
5 : ATTACHMENT LIEN
Ok, this one surprises people a bit, sometimes. But you should know that there are scenarios in which a court judge is at liberty to “attach” a lien against your property should a case against you be underway, whereby you are being sued (for anything) for damages. And, this lien would be applied prior to the actual judgment being rendered. The point of this, naturally, is to (somewhat) ensure that the plaintiff would be able to collect the at least some percentage of the damages awarded, should the case indeed be ruled in their favor. NOTE – The judgment imposing this attachment may have NOTHING to do with the actual property itself. (Wild, right?)
BONUS : JUDGMENT LIEN
A court judge also applies this type of lien, but only after a judgment would have been rendered against you in a closed suit, whereby it was determined that you were responsible for damages. (Surprise, surprise.)
(Oh, and by the way…the above list is ordered in priority of who owns the rights to collect first, 99% of the time. Obviously, the government wins this battle every time).
– – – > So saith The JD PALLAS REALTORS ®