Seller wants to sell a house with liens on title

[littlemisskitty]

What is the name of your state (only U.S. law)? Maine

We are in the middle of buying a house that was advertised by the seller privately. In the mist of this, (after the agreements were made) we had a title search done on the property and found over 136 liens were on the property. They were added onto the title when she refused to pay any bills the last 3-4 years including taxes, government liens such as department of labor liens, and even something to do with a car not being paid. The seller when confronted claimed she was working on getting rid of these but that she had no money to do so. We were told by a lawyer it was normal to have this happen and that the sale can proceed by having the buyer pay the money for the house and having the seller use the money to pay off the liens. The question I have is if this is really 'normal' and secondly does this really work to give you a clean and free title to the house? How can it being done at closing result in a clean title? Won't the liens still be listed on the house and won't any outstanding ones become my problem? Are we missing a step that should be being done?

Thanks.

 

[Zigner]

What is the name of your state (only U.S. law)? Maine

We are in the middle of buying a house that was advertised by the seller privately. In the mist of this, (after the agreements were made) we had a title search done on the property and found over 136 liens were on the property. They were added onto the title when she refused to pay any bills the last 3-4 years including taxes, government liens such as department of labor liens, and even something to do with a car not being paid. The seller when confronted claimed she was working on getting rid of these but that she had no money to do so. We were told by a lawyer it was normal to have this happen and that the sale can proceed by having the buyer pay the money for the house and having the seller use the money to pay off the liens. The question I have is if this is really 'normal' and secondly does this really work to give you a clean and free title to the house? How can it being done at closing result in a clean title? Won't the liens still be listed on the house and won't any outstanding ones become my problem? Are we missing a step that should be being done?

Thanks.

Generally, the escrow company would see to it that the liens are paid before money is disbursed to the seller.

 

[STEPHAN]

That is totally normal.

Just make sure you buy a clear title. And have title insurance. The will pay if anything gets missed.

 

[single317dad]

What is the name of your state (only U.S. law)? Maine

We are in the middle of buying a house that was advertised by the seller privately. In the mist of this, (after the agreements were made) we had a title search done on the property and found over 136 liens were on the property. They were added onto the title when she refused to pay any bills the last 3-4 years including taxes, government liens such as department of labor liens, and even something to do with a car not being paid. The seller when confronted claimed she was working on getting rid of these but that she had no money to do so. We were told by a lawyer it was normal to have this happen and that the sale can proceed by having the buyer pay the money for the house and having the seller use the money to pay off the liens. The question I have is if this is really 'normal' and secondly does this really work to give you a clean and free title to the house? How can it being done at closing result in a clean title? Won't the liens still be listed on the house and won't any outstanding ones become my problem? Are we missing a step that should be being done?

Thanks.

You're right to be concerned. While outstanding liens are often small enough to be satisfied by the sale price of the home, the seller will likely owe their mortgage company a significant amount (80-100% or more of the value of the home), and as first lien holder, the mortgage company can be expected to take legal action to protect their investment and collect the amount due them before any other liens are satisfied (including a second mortgage). This may result in the same of the house being impossible without the cooperation of some or all parties involved, and may include you having to "pitch in" more money to achieve the sale, or simply walk away.

The lending institution (your mortgage lender), the title company, buyer's agent, and the escrow company are all familiar with resolving these issues, but that requires placing a lot of trust in people you either barely know or may never meet. While it's entirely possible to have the sale of a home like this go forward uneventfully, I recommend you consult with a local real estate attorney for the purpose of checking the title company's and agent's work toward ensuring you receive a property with clean title.

 

[LdiJ]

What is the name of your state (only U.S. law)? Maine

We are in the middle of buying a house that was advertised by the seller privately. In the mist of this, (after the agreements were made) we had a title search done on the property and found over 136 liens were on the property. They were added onto the title when she refused to pay any bills the last 3-4 years including taxes, government liens such as department of labor liens, and even something to do with a car not being paid. The seller when confronted claimed she was working on getting rid of these but that she had no money to do so. We were told by a lawyer it was normal to have this happen and that the sale can proceed by having the buyer pay the money for the house and having the seller use the money to pay off the liens. The question I have is if this is really 'normal' and secondly does this really work to give you a clean and free title to the house? How can it being done at closing result in a clean title? Won't the liens still be listed on the house and won't any outstanding ones become my problem? Are we missing a step that should be being done?

Thanks.

Yes, this is absolutely normal. Any sale where the seller has a mortgage has a lien on it as well. What happens is that the title company finds out about the liens as part of their title research. The money goes from you (or your mortgage company) to the title company. The title company pays off all the liens directly to the creditors and issues a clean title to you, and a check to the seller for any remaining balance.

The only possible problem is if the liens exceed the sales proceeds, then the title company either has to stop the closing, or the seller has to convince junior lienholders to abandon their liens. Either you end up with a clean title, or you don't close.

 

[FlyingRon]

The only possible problem is if the liens exceed the sales proceeds, then the title company either has to stop the closing, or the seller has to convince junior lienholders to abandon their liens.

Or he brings cash to the table. I've sold one property where I was underwater on and I just bought one the other day where the seller had to bring money to the table as well.

 

[LdiJ]

Or he brings cash to the table. I've sold one property where I was underwater on and I just bought one the other day where the seller had to bring money to the table as well.

Yes, of course that was an option I neglected to mention. However, in this particular instance it doesn't appear that the seller has any cash to bring to closing.

 

[STEPHAN]

It does not sound as the seller is under water with his mortgage, otherwise it would be called a shortsale anyway.