Finding out that you have a lien on your property can be a frightening experience. Many people have heard of liens, but not everyone understands what they are. A lien is placed on your property by a creditor when you fail to pay a debt. Most commonly, a lien is placed by some type of government entity, like the Internal Revenue Service, or a loan originator.
When a person fails to make payments on their taxes, for example, the IRS may place a lien on their property. This tells any inquirers that the property owner owes the government money, as a lien is public record.
A lien affects what you can do with your property. If you want to refinance or sell your property, you must have a clear title. If there is a lien placed on your property, it must first be cleared before you can refinance or sell. By placing a lien, creditors are guaranteeing that they will be eventually be paid. In most cases, a mortgage takes precedence over a lien. This means that you may sell your home, but the creditor will have to be paid out of the proceeds.
In some cases, the creditor may sell the property on which they place the lien in order to collect their money. This does not happen often and is not typically seen outside of tax liens. If you have a lien on your property or are being threatened with a lean, an experienced real estate agent can explain the implications of this with you.