Buying a home in North Carolina is an exciting experience, but it can also feel overwhelming at times. There are many steps and paperwork involved in a real estate transaction.
One of these steps involves a title search on the property that you are buying. This is a search done to make sure that there are no liens on the property.
House liens
A lien is a claim that a creditor places on a property to ensure that it gets paid. If the person selling their home to you owes money to a creditor, the creditor puts a lien on the home. That way, if the seller does not pay the creditor back the creditor can satisfy their debt through their interest in the property.
Liens are generally recorded in the local county clerk’s office and are a matter of public record. While finding out there is a lien on the property you are hoping to buy can affect the real estate deal, there are ways to satisfy the lien to make sure the deal still goes through.
Property cannot usually be sold with liens still on it. A house must have clear title before a buyer can take possession of it. This means that any liens on the property must be satisfied.
Paying off or negotiating the debt
Most times the lien is paid off with the proceeds from the sale. As a buyer this means the sale process can continue and you can move into your new home on the date you expected. If you are the seller, this means you do not have to worry about paying off this debt out of your own pocket.
You may be in a situation where the entire cost of the lien cannot be paid, but there are still plenty of options to consider.
The seller can try negotiating a lower amount with the creditor, the cost of the lien can be added into the closing costs or the sellers could agree to deduct the amount from their sale proceeds.
Dispute the debt or selling the house for cash
Disputing the debt is another option. The seller might not agree that they owe the debt or believe the amount is incorrect. There is no guarantee disputing the debt will be successful and disputing it will likely drag out the entire process even longer, so figuring out a way to satisfy could be a better use of time.
Another potential solution is to sell the house for cash, which would avoid having to clear the lien as part of the sale. However, this does not make the lien go away. You will be purchasing the home with the lien still on it, which means you could be the one responsible for paying it off at some point.
Payoff and satisfaction letters
Once the amount of the debt is agreed upon, you should obtain a payoff letter from the creditor. This is given to the escrow agent to the amount is factored into the overall real estate transaction.
When the lien is satisfied, you must get another letter confirming the debt has been paid. This is extremely important since it can prevent future problems if the creditor comes back and claims they have not been paid.
Real estate transactions are already complicated, and liens can add another layer of complexity. It is important to have professional guidance through the process.