What is Lien?

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Lien refers to a warning or a notice that is given to a property owner saying a certain creditor claims that you owe him or her money. Generally, lien is a record that is made public. For actual properties, liens are registered at the count record office or with an agency of state such as secretary of state for boats, cars or office equipment. Real estate liens are mainly used by creditors in collecting money owed to them. Liens related to personal properties such as vehicles are less common though they are effective in collecting debts.

Effect of Lien on Properties

A clear title is required in order to refinance or sell property. A lien placed on a house, car, mobile home or any other property you own places doubt on your ownership title. This makes it necessary to pay off the debt in order to clear the title. Creditors are aware that placing a lien on your property is an easy and almost sure way of getting you to pay off a debt immediately or later. Essentially, creditors hold the right to sell off your property and recover the lien. This sale is by way of foreclosure. This rarely happens except for liens related to tax. The reason for this is that in many cases, mortgages are placed on properties way before liens are placed. This means that the mortgage has to be cleared before payment on any lien is made. In the event that a creditor forecloses a lien, the creditor has to continue making mortgage payments or the property is lost to the mortgaging firm. So, in most cases creditors prefer to wait for the sale of the property as opposed to going the foreclosure sale way. Since buyers won’t purchase properties until such properties have a clear title, sellers usually spend a section of the purchase cost to pay for the lien.

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