Can I Find Out If a Lien Is Attached To A House I Am Considering Buying?
by Walter
A friend of mine bought a house in Bethesda, MD. I was surprised he was able to get a loan, as I knew he had been bankrupted a while ago. Now he needs to sell, and move into a smaller property, and has asked me if I want to buy.
Because of his credit background, I am unsure as to whether the property has only the debt he says he secured to buy it.
Is it possible there are other debts on this, such as liens? How do I discover whether a lien is attached, and is it possible to find out the details of it?
Lanard's Response
Walter – You asked, Can You Find Out If a Lien Is Attached to a House You are Considering Buying? The answer is yes, you can, but it is more like yes, you should! And the response has three critical parts: 1) A Contract, 2) a Title Search Examination, and 3) a Title Insurance Policy.
The Contract: Let's start with the assumption that you will have a written contract agreement detailing the property's sale and purchase, including a declaration that the seller will convey ownership to you free and clear of encumbrances. Be governed by the practice that if it's not in writing, it doesn't exist.
Title Search Examination: When you buy a home or property, your lawyer or legal representative will conduct a title search (also called a title examination) to determine property ownership. The title search will involve collecting and examining, in detail, all of the public records that affect the title to the property you are purchasing.
Title searches help identify potential title-related issues relating to your property. Still, mistakes happen (in the public records themselves, as opposed to just errors on the part of your examiner). Consequently, you could be involved in a legal battle if a title conflict comes to light after closing your real estate deal.
Title Insurance Policy: TTitle insurance can protect you if someone sues you after transference of title, claiming an interest in the property dating back to before you bought it. Common claims come from a previous owner's failure to pay taxes or contractors who say they were not paid for work on the property before you purchased it. If you are forced to go to court over title-related issues, your legal fees will be paid. If you lose the property due to a title dispute, you will be reimbursed up to your policy's limit.
Similar to other types of insurance, title insurance policies have specific exclusions, so it is essential to clarify what your policy covers and does not. Some title insurance policies, for example, do not cover or have limited coverage of problems related to easements, liens, or mineral rights.
Who Pays for The Title Insurance? While the answer varies from county to county and state to state, some states may require the seller to pay some or all of the title insurance costs, typically paid in full as part of your property's closing costs. The seller doesn't need the insurance for themself, though, so covering the cost of the buyer's title insurance policy is generally regarded as a gesture of goodwill. Ask your legal representative to outline your responsibilities and the seller's responsibilities.
I hope this helps!
