Real Estate is a secured asset for your lender. Essentially, your lender’s interest in the property is protected by their ability to place a lien and even foreclose on your home, in the event of non-payment. A lien does not give anyone ownership in your property, but it does give them the right to collect what you owe them out of the proceeds of your home’s sale price. While we won’t go too in-depth about the lien process, here are a couple liens to learn about:

Mortgage – Until your home is free and clear, your lender will most likely have the “first position” on your home. Many times lenders are hesitant to take a second position on your home, because they have invested the most money into the property.

Voluntary Lien – A voluntary lien is one that you’ve taken out using your property’s value as collateral. Home equity lines, second mortgages and even car loans are all considered voluntary liens.

Mechanic’s Lien – Also known as a Contractor’s or Construction Liens, a mechanic’s lien can be placed on your property for any work you had done to your property that was not paid in full. This kind of lien protects contractors who have gone unpaid, by allowing them to claim their money when the property sells. The unfortunate thing in this economy is that a second or even sometimes third position on a home may result in your debt never being fully paid, if the property sells for less than the lein-holders are owed.

Divorce – There is actually such a thing as a divorce lien, and is placed on a property that is co-owned by former spouses. A divorce lien is necessary to ensure that both partners are given their share of the profits when the house is finally sold.

HOA Liens – Your Homeowner’s Association is also given the right to place on lien on your property when you miss payments of your mandatory association fees. When selling a home, you will need to ensure that the new buyer will not be responsible for your due fees, and you can only do this by presenting an HOA certificate before closing.

Federal Tax Liens – The federal government is always given the right to place a lien on your property for any unpaid federal taxes. When the IRS calls an exact amount due, you will have only 10 days to respond and pay before your home has a lien placed on it.

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