Q: How can I find out if a property has any liens on it? If it is a short sale, is the Realtor’s title company enough? How do I find someone to independently inspect the property (other than city inspectors)? –Donna
A: There are a couple of ways to know whether a property has liens on it. The most obvious liens are all recorded mortgages on the home, which must be cleared in order for the seller to transfer title to you. However, there can also be liens against the home for past-due property taxes, federal or state income taxes, back homeowners association dues, delinquent utility and garbage collection fees, and even mechanic’s liens for contractors’ bills that the seller didn’t pay.
If these liens have been placed on record with the county recorder’s office, they are actually on the public record that you can access electronically in some counties or in person by visiting your county recorder’s office. These records should also uncover recorded easements — various rights that your neighbors, former owners, or even corporate or government agencies may possess to use your property without owning it.
If you have a particular concern about liens, you should feel free to proactively check the recorder’s office records. However, this is also the job of your title company — they will search title and any liens that aren’t going to be removed by virtue of the sale that will either become exceptions to your title insurance policy (e.g., easements that can stay in place while you own the property) or title clouds that will prevent the transaction from being able to close escrow.
The point of recording liens is to put bona fide purchasers — innocent and unknowing buyers, like yourself — on notice of their existence before they buy the property. Accordingly, if you buy the property and an unrecorded lien comes up, chances are that the lien holder would be out of luck, left with either suing the former owner or simply holding the bag, depending on the nature of the lien.
If the title company fails to uncover a recorded lien that they should have found, your title insurance policy kicks in to protect your interests. The fact that your transaction is a short sale makes no difference on these particular matters, except that it is much more likely than in a “traditional” equity sale that one or more of the lien holders will refuse to green-light the transaction, because the proceeds of the sale will not be sufficient to pay them off.
Keep in mind that while most buyers rely on their brokers or agents to select a title insurance company with whom they have a relationship and history of successfully and efficiently closing transactions (especially important in areas where the title company also provides escrow closing services), you are by no means required to use “the Realtor’s” title company.
It’s generally a good idea, as agents who have relationships with title officers tend to be able to manage them a bit better than strangers, and in short-sale cases, it’s important that the title officer be ready and willing to provide revised closing statements and the like repeatedly on short notice.
Also, some listing agents strongly urge buyers to use their title company — and may even prioritize offers, in a multiple-offer situation, by those who agree to work with their choice of title company, because they were involved with preliminary work before the property was listed or in contract.
However, it is illegal for you to be required to work with a particular title provider, and if you have reason to distrust a particular company, you might ask around in your circle — and especially your agent — for referrals to another one.
And that’s also the best way for you to find an independent, licensed (if your state licenses, which some do not) or certified home inspector to report to you on the current condition of the home before you remove contingencies or your objection period expires. Ask the people you know for referrals, and don’t forget to ask your broker or agent.