When a consumer purchases a home from a lender, the lending institution holds a lien on the property until the loan is paid in full. This means that the bank or mortgage company holds the title until the property owner has satisfied his debt. In this situation, the purchaser of the home understands and willingly concedes that the bank has control of the title until the debt is free and clear.
This type of understanding between bank and homeowner is non-adversarial; it’s simply an ordinary, everyday business transaction.
A judgment lien, however, is another issue entirely. Simply put, a judgment lien is a “hold” on real estate (or personal property) by an entity, in response to an overdue debt on the part of the owner of said property. The debt must be verified and established in a court of law prior to lien placement.
What actually occurs in this situation is that the property itself becomes collateral when a loan has been defaulted; this is a common occurrence when a second mortgage on a piece of real estate is granted by a lending institution.
The lender in these situations can actually force the sale of the property; the borrower must pay the lender before he can obtain the remainder of the proceeds from the sale.
This is a lien placed on a property owner for materials and labor he owes for repairs or innovations that actually improve the value of the property; in other words, for capital expenditures that will improve the value of the asset on the owner’s balance sheet.
In some instances, a lien auction is held in an effort to liquidate some of the owner’s assets to satisfy a financial lien in order to pay delinquent property or income taxes. In these instances, the primary goal of the auctions is to satisfy debt; these types of auctions are supervised by a governmental official.
When a home buyer and seller come to a mutually acceptable agreement on a piece of property, a title (or abstract) company is hired to research all of the documentation that has been recorded with regards to the property being transferred. If no judgment liens have been filed, the title is transferred to the new homeowner (or, in most cases, to the lending institution loaning money to the buyer) after the closing.
When a transaction is handled through a bank, the title search is automatically taken care of. However, if you are purchasing a home that is going to be financed by the owner, it’s imperative that you hire the services of the title company your self. Otherwise, you could be making payments on a property that you will not obtain a clear title for.