Better Informed Housing

Summary

This video script delves into the intricacies of clearing liens and addressing title issues in real estate transactions. It covers the process of identifying and resolving various types of liens, including mortgages, credit lines, and tax liens, which must be cleared before closing. The role of title companies in ensuring clear title and the importance of addressing tax liens, particularly from entities like the Illinois Department of Revenue, are emphasized. The discussion also highlights how Better Informed Housing and Enterprise Title assist in resolving these issues to facilitate smooth property sales.

Takeaways

• 😀 The title commitment document outlines all the mortgages and liens on a property that need to be addressed before closing.
• 😀 Attorneys review the title to ensure that any outstanding liens or mortgages are cleared before the closing, ensuring a clean title for the seller.
• 😀 A title commitment identifies existing liens, including second mortgages and lines of credit, and notes whether they are paid off or still active.
• 😀 If mortgages or liens are still active, the title company must confirm if they are being paid off through the sale proceeds or if a release is required.
• 😀 Tax liens, such as those imposed by the IRS or state tax departments, must be resolved before a property can be sold. They cannot be waived and must be paid off.
• 😀 If a property has a tax lien, the seller or the buyer must work to pay off the lien, either through sale proceeds or separate financing.
• 😀 The process of clearing a lien involves determining whether it has already been released or needs to be settled before closing.
• 😀 In the case of unpaid tax liens, the seller needs to contact the tax authority, such as the Illinois Department of Revenue, to arrange for a payoff and release.
• 😀 A tax lien is a significant issue that can delay or cancel a sale, as it needs to be fully addressed for the title to be cleared.
• 😀 Better Informed Housing provides legal assistance and title services, helping individuals navigate real estate transactions and resolve title issues efficiently.

Q & A

What is the purpose of a title commitment in a real estate transaction?

A title commitment is a document issued by a title company outlining any existing liens, mortgages, or encumbrances on a property that must be cleared before the sale can proceed. It ensures that the buyer will receive a clear title to the property after closing.

What does it mean to 'clear a lien' in the context of a real estate sale?

Clearing a lien means resolving or removing any claims against the property, such as paying off mortgages or obtaining releases for liens, so the title can be transferred to the new owner without any outstanding issues.

What are some ways liens can be cleared before closing?

Liens can be cleared by paying off the outstanding balance using the proceeds from the sale, refinancing, or obtaining a release document from the lien holder to confirm that the lien is no longer in effect.

Why are tax liens particularly challenging to clear in a real estate transaction?

Tax liens, particularly from state or federal agencies, are difficult to clear because they cannot be easily waived or ignored. The lien must either be paid in full or released by the taxing authority before the property can be sold.

What happens if a tax lien is not addressed during a sale?

If a tax lien is not addressed, it can prevent the closing of the sale. The lien must be cleared either by paying it off or obtaining a release from the taxing authority, as it will affect the buyer's ability to receive a clear title.

How does a title company assist in identifying and handling liens?

A title company reviews the property's title history, identifies any existing liens, and reports these issues to the parties involved in the transaction. They help ensure that any outstanding liens are cleared before the property can be transferred to the buyer.

What is the significance of a lien being 'released' in the title process?

When a lien is released, it means that the lienholder has agreed to remove the claim against the property, either by receiving payment or through other legal means. This ensures that the buyer will receive a title free from encumbrances.

What are the potential risks if a lien is not cleared before closing?

If a lien is not cleared, the buyer may not receive clear title to the property, meaning they could be responsible for the debt or encumbrance. This can also delay or even halt the closing process, as lenders and title companies typically require a clear title for the transaction.

What are the consequences of unpaid taxes leading to a tax lien on a property?

Unpaid taxes can result in a tax lien being placed on the property, which gives the government a legal claim to the property until the debt is paid. This lien must be resolved before the property can be sold or transferred to a new owner.

How can a seller pay off a tax lien during a real estate transaction?

A seller can pay off a tax lien using the proceeds from the closing, provided there is enough equity in the sale. If the lien cannot be paid from the sale proceeds, the seller may need to pay it out of their personal finances to clear the lien before the sale can proceed.