Case Study: Do I Have a Lien on My House?
DISCLAIMER: THIS IS BASED ON A TRUE STORY. ALL NAMES AND SPECIFIC INFORMATION HAVE BEEN REMOVED TO PROTECT THE PRIVACY OF ALL PARTIES INVOLVED.
Bandit signs were put out. The phone rings. A homeowner in a financially distressed situation. Reel Property Solutions, LLC toured the property, made an offer, property was under contract, and went to closing. During this time the gut feeling was something wasn’t right, but there wasn’t an exact answer. In the end, the answer was very clear. Read further in this case study of a particular transaction to prove why the seller should be honest with themselves and think about: Do I have a lien on my house? Lesson learned: provide an honest answer right away. Also, for Reel Property Solutions, LLC, to do a title search before thinking about the next steps.
To back track, definitions and examples and why this is an important piece of information.
What is a lien to a property? Here is an excerpt from www.nolo.com to define a lien:
“A lien is a notice attached to your property telling the world that a creditor claims you owe it some money.”
- Mortgage Liens
- IRS Tax Liens
- Alimony/child support/other court mandated Liens
- Contractor/Mechanical Liens
- Property Tax Liens
- Easements to the property
- Inaccurate tax records
- Ensure the homeowner is the person on title
- Liens to the property
In the case of Reel Property Solutions, LLC asking a homeowner to think: Do I have a lien on my house? The answer was: the homeowner stated they owed a particular amount on the mortgage. Reel Property Solutions, LLC presented an offer, the offer was accepted, then the homeowner came back to state they forgot about another lien of a second mortgage which was disclosed by the financing source. The offer was renegotiated, accepted, the property was under contract. A real estate attorney oversaw the transaction. Finally, closing day arrived. The previous afternoon the closing attorney did the title search to discover ANOTHER lien to the property! This uncovered the seller owed a significant amount of money to a creditor, therefore, the property could not be sold until the third lien was paid off in full. Reel Property Solutions, LLC walked away.
Lessons learned:
- When a seller is thinking “Do I have a lien to my house?” Be honest and disclose information right away! In this instance, the seller was in a financially distressed situation, decided to sell off market, during this timeframe the property was going into the foreclosure process while under contract. Since the seller didn’t have the means to pay the mortgage payments, the seller did not have the means to pay off the third lien. Also, in this instance, the seller denied knowing about the third lien. (Although when the lien was discovered, the loan papers showed proof a signature that matched the signatures on the purchase agreement papers.)
- Reel Property Solutions, LLC trusted the real estate attorney’s office to do the title search. Since this was done the afternoon before the closing, this was now too late to reasonably do anything with the third lien. The title search should have done before the property is under contract to ensure any and all liens are disclosed. That way, when a homeowner thinks about Do I have a line on my house? and they give their answer, then Reel Property Solutions, LLC could have worked with them to show what other information was uncovered and perhaps may have been able to continue with the transaction.
- When talking with other real estate professionals, especially with Fortune Builders experts, about doing a free title search, the consensus was sometimes information doesn’t come up right away, so paying money for a deeper title search may need to be completed. In the instance of this homeowner who had 1 mortgage lien, 1 downpayment assistance loan lien, and 1 other loan lien, the third lien was from a financing source different from the mortgage and downpayment assistance sources, making this a bit trickier to uncover.
- Follow that gut feeling! A blog I Have A Gut Feeling was published on March 14, 2018 on this website which tells ways to tune into your instincts. The gut feeling told Reel Property Solutions, LLC something was wrong during this transaction, but exactly what was wrong wasn’t clear. At first, the homeowner was emotional with selling the property because of the wonderful memories with their spouse who is now deceased. Then the homeowner moved to a different home and was very happy. The next gut feeling was Reel Property Solutions, LLC’s lender was being difficult and showing obvious signs of not wanting to proceed with the transaction; therefore, Reel Property Solutions, LLC discontinued that lender then all seemed calm. A second lender came onboard which was a smooth transition. However, about 4 days into working together, the lender was falling behind with processing which caused the closing to be scheduled three different times in one week. This caused a lot of stress on Reel Property Solutions, LLC, therefore the gut feeling was there was something wrong with this lender. Closing day finally came. While waiting and waiting and WAITING in a conference room to close, the gut feeling was very apparent something was wrong. An attorney came in and stated the three liens were discovered, the homeowner denied knowing of the third lien, and Reel Property Solutions, LLC walked away without a property to renovate.
Reel Property Solutions, LLC has a checklist of questions and will preface by saying if you don’t know or not sure, that is OK, but at some point, the factual information will need to be disclosed. This case study is a classic example of WHY being honest, the homeowner having accurate information, and doing a title search right away will save everyone time, money, and heartache. For questions about liens, think and think Do I have a lien on my house? Remember, the answer might have a lot of information, but best to know upfront than when time is up and very few options remain.
Reel Property Solutions, LLC always strives to be customer focused, professional, work on the homeowner’s timeline, and accommodate as needed. If you or someone you know is in need to sell their property, please contact info@reelpropertysolutionsllc.com or call 507-218-8788. CATCH A WINNER!
