Liens: What Military Homeowners Need to Know Before Selling

There are no two military moves that are exactly alike, and some work out smoother than others. Orders and instructions may be delayed, students in the household may be disrupted during the school year, and some moves may occur to another time zone or even continent.

Case in point, several things can go wrong even when following a military-focused moving checklist, and this isn't even taking into account concerns or additional effort involved in selling a currently owned home for military members and veterans. Liens can sometimes remain undiscovered until days before the sale is finalized. Keep reading to learn what property liens are, the various types of liens, and what military personnel need to know about them before selling.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Property Liens and Title Insurance

Liens are a means for creditors to collect any funds they are owed in relation to a property. When a lien is taken out, the property is considered collateral for a loan. The title cannot be cleared until the lien is paid off. Creditors will get their due sooner or later, and this may impact the way military homebuyers calculate a budget.

The process all begins with attaining title insurance, which is something all military homeowners should invest in. Title insurance is essentially designed to insure lenders and buyers against property title discrepancies or deficits, and lenders generally mandate this. Often, military servicepersons and veterans can purchase this coverage at reduced rates through their routine insurance provider or the office of veterans affairs.

It is required for sellers to provide buyers with evidence of a clear title that indicates that no lien is currently in place and that the property's title is good and clear on the settlement date. Property liens can be in place for many reasons (which we'll cover later), and in cases of death or divorce, titles can become what is known as "clouded," meaning they aren't necessarily clear for sale.

Consider the worst-case scenario of finding out about a property lien just days before a sale, which happens more often than one may think. This is because settlement companies tend not to complete title research to this depth until very close to the closing date. The only way to obtain a clear title is to resolve the debt either via payment to those owed or by finding a resolution with the lien holder.

Types of Property Liens

The first lien on a property is typically a mortgage lien, which takes dominance over other loans. However, second loans also create another lien, which could pose problems when selling if all payments aren't current. Often, lenders pay these taxes for owners as a part of their mortgage agreement.

The second most common type of lien is unpaid property taxes, which can result in the lender or loan falling behind on payments. Property tax liens are vigorously enforced, and those in debt on these taxes can find themselves with a home in repossession.

Homeowners' association liens can be taken out should dues not be paid in a timely manner. This can allow the HOA to take over home ownership if the association enforces any super-lien state regulations in place. In states where no such laws exist, primary mortgage liens take precedence.

Judgment liens are a form of involuntary lien that can be placed on a home owned by an individual with a standing judgment against them. In some instances, judgment liens can force the sale of a home. Mechanic's liens can result from unpaid debts to contractors who performed work on the property.

Don't Get Caught Off Guard with a Property Lien

If there are any doubts as to whether the home has any lien, consider working with a military real estate agent to look deeper into the case before listing the property for sale.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.