I want to sell a house that I inherited. What happens if a lien is found?

Question

I inherited a house a few months ago from a relative, that I have been caring for the past 5 years. I am living in the house, but I want to sell it, and move somewhere else. I was wondering if I should pay and get a title search to make sure there is no liens attached or other suprises, or should I wait until I put it up for sale, because I was told the buyer have to get a title search anyway. If one is found, does that stop the sale? I had checked the recorders office and nothing was recorded at the time, but I hear now that liens are recorded in different places. Also , I hear that if liens are there and you want to sell, then money is placed in escrow and lienholder is paid first and you get the rest, Is this true? Help! I m confused here! I have no expereince with buying or selling a house right now. Thanks!

Clarification: I was told by Recorders' office clerk that liens are sometimes recorded in other places. "Other places can include the county courthouse". Are you usually notified by the lienholder of any liens being placed on your property. I heard that they have to get a judgment first, whatever that means. Thanks so much!

Answer 1

You should either pay for a title search or do it yourself to see if there are any viable liens on the property before putting it up for sale. You do NOT want any surprises once a sale goes into escrow!

Only those liens filed with the registrar of deeds responsible for the property's location will be valid. There is only one registrar for any given piece of property so you don't need to do multiple searches.

You are correct that any valid liens must be paid off prior to the transfer of the property to a buyer. You can either do that yourself prior to putting the property on the market or just let the money be taken from your funds at closing to satisfy the lien. This is a very common process and basically is a non-issue for the closing agent.

Answer 2

Liens that affect your property are recorded at the local Clerk's office, and if you didn't find anything recently, chances are there are not any liens against the property.

Since it has been so long, if there was something, you most likely would have been notified about it.

An attorney is pretty much going to search what you did. I would wager that you are ok to go ahead and place the house on the market.

If on the very rare occurance there should be a lien, it does not stop the sale if you are willing to pay it. But it doesn't appear that there are any liens, since you already checked.

Don't worry about any silly details regarding a buyer his lawyer, etc...title insurance cannot be issued without clear title and the lender will review title as well, regardless if this is in the real estate contract or not.

Getting a formal title search in advance will not make the transaction go any faster, unless your buyer is using your same attorney and the attorney is using the same title company, which any Realtor will not allow their client to do, b/c it's a conflict of interest. No attorney will accept a title serach performed by another attorney and sign their name on it without double checking...which involves a trip to the courthouse.

Answer 3

You are correct that a title search will be required for the sale to take place if the buyer gets a mortgage. If a lien is found, that would be paid off at closing from your proceeds. If that happens, you'd be no further behind than if you had a search done now and turned one up.

Unless you have strong reason to think that there is some kind of lien on the property, I wouldn't worry about it. Anything is possible, but you've done the basic checking.

Answer 4

You might want to get a abstract of title on your inherited property, work with the probate court if applicable to help clear any potential clouds on the title. You dont want to wait. When you agree to sell and a purchase agreement is signed there is normally a closing on this contract. If clearing up these matters take longer than that then you might be in breach of that sales contract, perhaps subject to civil suit for damages. Just FYI, most counties in most states now have a public clerk of the court on line where regular people like us can search. Your would start with the name of the person or persons you inherited it from, and almost all liens against the subject property should be there. It is not an abstract of title, and I not an attorney but these type of websites are open to the public so it may help you alittle. Good luck

Answer 5

Well, a standard clause in contracts involving sale of real estate is that you warrant that the house you are selling is free from liens and encumbrances. I'm pretty sure the buyer or his lawyer will look for this one. If that's in there and they should happen to find a lien, they will have recourse to you for the amount of the lien vis a vis the purchase price.

Yes, what you said about the lienholder being paid first is true and is the primary reason liens are recorded/registered so that their claim is already noted and they can preserve their interest in the land.

Answer 6

if a lien is found, you would pay it out of the proceeds of the sale, and then walk away with less money. but is that such a problem? when you close, they will cut checks for the buyers realtor, the sellers realtor, the title company, maybe the water company or something like that...the lienholder would be just another check to cut. I don't know how much a title search costs, but it has to be done anyway when you close so it would seem like a waste to do it twice.

Answer 7

Just get a title search it does not cost alot. If it is not clear then at closing the liens will be paid & you get the rest of the cash. You just inherited a house for free come on this dpes not happen to everyone, some of us will never get anything free. Besides if you get the title search done before you sell than the closing will take place alittle sooner because that will be already done & with the title company.

Answer 8

During the title search before closing a sale, that lien will be paid off from the proceeds.
I sold a house once, where I had assumed a note, and a lien was found for $500 by a second morgtage holder. I never knew about it even after several years.
It was merely paid from the proceeds.

Answer 9

Yes, the information you were given is correct. That is IF there are any liens on the property. You will probably want to contact a real estate professional to list your property. They will give you tips to help it sell, and other advice that makes their fee worth the price. They usually price the house so that that their commission is covered in the listing, tho' you are responsible for paying them.

Best wishes.