What Happens When a Lien Is Put on a House?
A lien is a hold or claim placed on the property to secure the payment of a debt or other obligation. Placing a lien on a property gives the lienholder standing as a creditor to be paid from the proceeds should the property be sold or refinanced.
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Warning
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The lienholder can foreclose on a home, especially if there is a lot of equity in the property. If there is not much equity, it typically doesn't pay the lienholder to do so, since he or she would be last in line to be paid.
Effects
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The home cannot be sold or refinanced unless the lien is cleared. A title, which is ordered once an offer has been made on the property, or if the owner wishes to refinance, will show any liens or judgments against the property that must be settled before a loan closing can take place.
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Mechanic's Liens
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Several types of liens can be placed on a property. The most common is a mechanic's lien, which is placed when the property owner owes money for materials, labor, repairs, maintenance or new construction.
Tax Liens
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Another common lien is a tax lien. Depending on the state law, the property owner may be responsible for paying the tax lien, even if the previous owner incurred the debt.
Debt Collection Liens
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Creditors and debt collectors can petition the court to place a lien on a property if they are owed money, but the debt will usually not be paid until the property sells or refinances.
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References
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