What is a lien on a house | Property Liens
So what is the lien on a house? Basically it's a homeowner that owes somebody some money and we're going to cover that today. I'm gonna try and make this as simple as possible. Hey it's me Gerald, an active real estate agent and investor and I'm all about helping others with what I've learned and continue learning since 2007 so if you're researching or need help selling or buying a house without feeling pressured, then you've come to the right place.
Make sure you subscribe and click that notification bell to get more videos just like this when they come out. Okay so the homeowner knows about the mortgage so they make a monthly payment, now somebody else they owe which more than likely that they know they owe them but they didn't realize they could put a lien on my house. That's where this comes into play, now believe me the person has probably already try to collect the debt and they'd rather have the money and rather get paid then going about putting the lien on somebody's house. So these liens are due because a homeowner doesn't pay their bills. So, how does this tie in to selling a house? Liens are typically recorded at the county records so check it out because probably easier for me to to show you. Okay so this is a quick illustration of a mortgage lien I know a lot of y'all probably know how this works but bear with me i'ma show you how it all ties in with the other liens as well. Again, there's a lot of moving parts but right now we're just gonna deal with a mortgage lien.
In this example we're going to use a hundred thousand dollar house that Henry bought about a year ago and he put twenty thousand dollars he was working with Larry the lender that fronted him eighty thousand dollars this is what we call an 80/20 loan so when Henry closed on this house to purchase it he he sent the twenty thousand dollars to Tom. Tom the title guy this is a title company and Larry sent the $80,000 to the title company as well but Larry's got a lot of skin in the game how does he know Henry's gonna pay him off well Larry created another document it's called a real estate note also known as a mortgage lien alright and he's gonna have Henry sign this document what that does is that that attaches this property here to that lien as collateral so in the event that Henry can't pay, Larry has got to have some kind of recourse to come over here and take the house over so he can get his money back now once all that money gets over there Tom gives all that money to the seller, whoever they are buying that house from so once this lien is signed by Henry, Tom the title guy will take this lien and record it over here at the county records Ok, the county records is public records so it's there for anybody see that Henry still owes Larry $80,000 that lien can only be released by Larry so Larry probably ain't gonna release it until his money is paid till he gets all that money all right so we gonna keep this kind of simple let's say Henry pays everything off over time what happens is Henry doesn't owe Larry more money Larry creates another document it's called a release of lien or something similar that gets filed over here as well at the county records so as far as Larry's concerned this document what that does is lets everybody know that that mortgage lien has been satisfied Henry doesn't know Larry anymore money as far as Larry's concerned there is no liens that's that's just Larry though okay so now say Henry wants to sell it to Bob the buyer Bob the buyer works with his own with his own title company or it could be the same title company it doesn't matter but the first thing Tom this title company, or one of the first things you can do he's gonna come up here and check the county records among other places and when he checks with the county records he's gonna notice this release of lien it's gonna look good around there and everything should be good there is no other liens nothings preventing him, he finds out that Henry does own it free and clear you can run up a title insurance policy to back him up Bob the buyer is happy he's getting the house is free and clear maybe he's paying cash for it but what happens when Henry wants to sell before Larry is paid off let's let's run it that way real quick real quick if you are getting value out of this video make sure you give us a thumbs up and more importantly if you know this information can help somebody make sure you share this video with them alright thanks okay so we're gonna redo this a little bit we still have the mortgage lien in place remember this lien attaches to this property over here alright this was previously eighty thousand twenty thousand that's kind of old from the previous transaction alright so Bob the buyer comes to buy the house from Henry Henry has not paid Larry off all the way yet but he's still gonna buy say for a hundred and twenty thousand dollars alright he's got a little bit equity built up and he's paid him off a little bit but not all the way tom title guy is still gonna come over here and check the county records Henry didn't let Tom know about everything that he's supposed to let him so he finds this lien that's one thing and and that's kind of expected if somebody has a house their financing so what he's going to do is gonna get with Larry the lender with with Henry's permission and he finds out he still owes him $70,000 but he also finds out is he found a second mortgage for $30,000 Henry Henry forgot to tell him but he took thirty thousand more dollars to update his house he also found a ten thousand dollar mechanic's lien so Tom asked Henry what will happen well there's ten thousand what's a mechanic's lien I don't know it's ten thousand dollars less that's the money that I was supposed to pay for a roof but the roofer didn't do his job right Henry got a new roof new roof for 10k but he aint paying because he wasn't happy they had some kind of disagreement a lot of times when you get work done to your house you'll have a big contract a lot of paperwork to make you sign all that kind of stuff , Henry didn't realize that he was giving the roofer permission basically to put a mechanic's lien on the house so now the roofer put $10,000 of mechanic's lien so now he's got seventy thousand on the first mortgage he's got thirty thousand in a second mortgage Henry said that I thought that would have gone down by now I've been making payments on it but he didnt realize it is interest-only loan so the principle remains the same so you got seventy thirty and ten that's one hundred and ten K can he still close for $120,000 he should be able to depending on how many how much it's gonna be fees and closing costs and taxes commission but just say he's got a hundred chance so he's got ten thousand dollars to work with say Tom work everything out and it's a ninety five hundred dollars in taxes, commission, fees, all that kind of stuff so Henry walks with five hundred dollars after closing and he's good but what happens if the market value of that house drops and he didn't realize what was going on and now it's 100 and he owes 110 okay so he owes more than a house is worth and now Henry's in a position where a lot of people call it's upside down with this house he owes more than what he can get for it can he still sell it well technically yes he still can but Henry's got to come out of his pocket to get rid of that uh the debt and or work with his creditors eliminate this debt maybe he can work something out on here to deal with them now there are times that somebody has made a mistake say the new roofer Henry did pay him off maybe he just forgot a roofer just forgot to go and put a release of lien on that not like I do then all the roofers gotta do is release the lien and there's ten thousand dollars saved okay the mechanics lien Henry knew about in other words he knew that he owed the roofer some money but he didn't realize the roofer could actually do that put that lien on the house that probably came from a contractor that Henry signed a lot of times we would get somebody come work in the house and get all this paperwork in this contract signed and we don't read it.
The roofer was probably just enforcing that contract that he signed so yes mechanic's liens are usually from contractors you know if you had work done on your house but there are other types in the first example if Henry paid off the house completely free and clear he'd still have to pay real estate taxes now if he fails to pay those real estate taxes eventually somebody could probably put a lien on for real estate taxes called tax lien judgments is another way he could that could attach to a property if Henry got himself in some kind of legal situation where he's arguing or they're trying to work something out legally well the judge can actually order him to pay and put a judgment on him and that could actually go to the to the property if he does not pay that person that he ordered to pay maybe we thought it was in go away but when Tom went to the title work company to look at the title he found that judgment another big one is IRS liens they don't play they come to get whatever these liens work in the same way because they attach to your property and you can't get rid of them unless you settle with your debtors now as we're wrapping up these liens are more involuntary you knew about them probably didn't realize they could actually attach to your property and that makes the difference between these types of liens and your mortgage lien where you know you get into debt so if you plan on selling the buyers will usually submit a contract and request at the seller pay title it's not mandatory reason is some say the seller that the seller should be responsible to ensure that there is they are passing good title to the to the buyer well if that's being the case then why not the seller go ahead and start working with the title company you can shop around their prices and start looking into your title work to get all that behind you so you'll know that you're coming in with a clear title when you do get a contract I have a quick question for you what is your biggest concern when it comes to selling the house let me know in the comments section below the community you might get some other answers they may be able to help you overcome those concerns as always feel free to contact me and the best way is to text me, my contact information is on this page or down in the description below thanks for watching and have a blessed day
