If you’re in the market to buy or sell a piece of property, particularly a house in Florida, you should be aware that issues may arise due to unsatisfied prior liens. This is especially true when dealing with a home that’s previously been through a foreclosure. Therefore, it’s important to understand the different types of property liens and which liens are extinguished by foreclosure.
What is a Property Lien?
A property lien is a non-possessory interest that a creditor places on your home to secure the debt owed to them. A lien gives them the right to take back ownership of the property, so they can sell it to collect the outstanding amount of money owed to them. While this is necessary to protect the creditor’s debt, it can cause issues with the property sale.
Common Types of Property Liens
Here are the most common types of property liens you’ll find in Florida:
- Municipal Liens
- Mortgage Liens
- Tax Liens
- Mechanic’s or Construction Liens
How Long Do Liens Stay on the Home?
Most liens remain as “clouds” on the property’s title until they have been properly taken care of and cleared by the lien holder. Some of them, such as municipal liens, are known as “unrecorded” liens because they are not public record. Some municipalities keep them in their own records, and you can only obtain them by formal request.
Foreclosure Doesn’t Extinguish All Liens
The foreclosure process doesn’t wipe out all liens. It’s actually quite common for buyers to get a home at auction only to later find out that the house still has a municipal, construction, or mortgage lien still attached. When this occurs, the buyer is not only indebted to the lienholder, but you are also responsible for it now. Each lienholder will receive a notification after the title is recorded and the owner’s information is updated.
There is some good news here, though. When you’ve purchased a home at auction, some debtors understand that it wasn’t your fault and may reduce or even forgive the debt. Yet, it doesn’t always happen, so don’t count on it. But you still have options. One such is to hire a representative who can try to negotiate the liens. This is usually helpful when dealing with federal tax liens, as you’ll end up saving money. Or, often, the lien was already paid, but the process wasn’t completed to remove it from the title.
So, What Liens are Extinguished by Foreclosure in Florida?
In general, liens are structured by priority. Upon completion of the foreclosure process, the lien that sent the property to foreclosure and all inferior liens are eliminated. For example, if a house has a first-priority purchase mortgage, a construction lien, and a second-priority home equity mortgage, it’s most likely that all liens will be eliminated through foreclosure.
If you own a home in Southwest Florida that’s subject to foreclosure, contact us today! We’d love to help you avoid foreclosure by giving you a no-obligation cash offer.