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Don’t Get Spooked By Involuntary Liens in Your Workflow

October 26, 2020  //  BY Team DataTree

Boo! We’ve all had that moment where we encounter a spooky surprise on Halloween, whether it’s a scary costume on the street or a performer that pops out in a haunted house. While these surprises are fun in nature, there are also those scary surprises that can pop up any time in real estate transactions — with double the fright and none of the fun for businesses.

A prime example of this kind of spooky surprise is involuntary liens…

Why Involuntary Liens Need to Be Caught Early in Transactions

Whereas voluntary liens refer to more contractual terms between two parties (like a mortgage), involuntary liens are claims a third-party imposes on a property to recoup money after an owner fails to meet financial obligations.

Let’s consider the case where a homeowner fails to pay state and federal taxes. In response to these delinquencies, the government can impose a tax lien on the property that forces the homeowner to pay what is owed. In light of the fact that a home can’t be legally sold with a tax lien on it (meaning current homeowners must pay what’s owed), finding a tax lien late in the mortgage process can be an unpleasant surprise for lenders as well as the prospective buyers.

While this provides an example of a personal lien, others are specific to the property. Take a mechanic’s or construction lien, for instance. If a contractor or subcontractor isn’t paid for the services they provided on a home remodel, they can assert a legal claim on the property to ensure they collect payments owed. Like tax liens, if construction liens don’t surface until the final phases of a home sale, it can delay the closing process as the current homeowner has to pay the debt before the sale can be completed.

Gain a Complete View of Property Encumbrances with DataTree

In today’s real estate market, industry leaders need more visibility of property encumbrances — beyond those typical voluntary liens like a mortgage. Now, it’s essential that they can also see transaction types that aren’t usually accessible in public record data, from state/federal tax liens to mechanic’s or construction liens.

That’s why DataTree by First American has expanded its database assets to include involuntary lien data. Access to comprehensive, verified data helps industry professionals avoid unpleasant lien surprises in the middle of real estate transactions and in turn better serve their customers.

To learn more about DataTree services, talk to one of our experts.


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