You may be frustrated to find a buyer for your home only to have the title search reveal a list of debts you must pay off before you can close on the sale. Many companies, government agencies and even individuals may place a lien on your property to secure a debt. They may even be able to force a sale of your property to pay such debts.
You may already be aware of existing liens on your property — for example, a mortgage is a type of lien, as you probably know, if you have one — but if any other debts/liens come as a surprise to you, some investigating may be in order. A title and judgment search should reveal any liens which must be cleared at or before closing.
Why does it matter?
In all property sales, the seller must transfer clear title in the property to the buyer. Clear title means no one else has a legal interest in the property. A lienholder has a legal claim or interest in the property at issue, so clear title cannot exist until the lien is removed. Title companies cannot and do not issue title insurance with an existing lien. Therefore, you will need to resolve and “clear” any liens on your property on or before the closing date.
Common types of liens
The easiest way to “clear” or cancel a lien is to pay the lienholder the full amount due. Closers and title companies often have no problem cancelling a common lien, such as a mortgage against the property, by applying the proceeds from your sale to pay off and remove the mortgage as a lien on your title. Other liens may prove more problematic and require legal help to resolve. Common types of lens include:
- Tax liens — A tax lien could exist as a debt to the municipality for unpaid property taxes or as a judgment for other types of unpaid taxes, such as income taxes to the IRS or the State.
- Mortgages — As stated above, common mortgages are a form of lien and rarely pose an issue.
- Home equity loans — Whether issued as a second mortgage or a revolving line of credit, they must be paid at closing, and “cleared”, even if there is a zero balance.
- Mechanic’s liens — If you had work done on your house and failed to pay a contractor or subcontractor, they can file a lien against your property.
In addition, the searches may reveal liens against your title that may have been previously paid off but were never released or cancelled. Any such liens must also be “cleared” or canceled at or before closing.
What about judgments?
In addition to the above liens against your property, searches may also reveal a prior judgment against you, personally, or against a co-owner (or even a prior owner), which was never satisfied or canceled. You may or may not have known about any such judgment. However, in New Jersey, any judgment obtained against you personally, automatically becomes a lien against any property you own within the state. If the judgment is against you, any co-owner, or even a prior owner of the property, it must be “cleared”/canceled before or at closing.
Review any judgment search carefully to confirm it is yours. Searches can often pull up names similar to yours, but which might not be you. Check the addresses and other details regarding the judgment to determine if it really does refer to you.
Liens against your title are serious matters which must be properly addressed and resolved in order to complete your sale. The real estate attorneys at Mariano & Coiro, P.C., are here to help you through the process of selling your home. We can review any outstanding liens and judgments attached to your property and assist you with obtaining the proper releases and cancellations for your closing. With over 36 years of experience in New Jersey real estate law, we understand the process and know how to create a smooth closing experience for you. Schedule a FREE and CONFIDENTIAL consultation with our Senior real estate attorney and Managing Partner, Joseph W. Coiro, Esq., by calling 800-800-9933, or send us an email.