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  • Writer's pictureMac Tumacay

The Different Types of Liens in Real Estate Investing

Liens in real estate investing refer to a legal claim against a property by a creditor. Liens can be placed on a property for a variety of reasons, including unpaid taxes, unpaid mortgage payments, and unpaid contractors' fees. In this blog, we will explore the different types of liens that can be placed on a property and how they can impact real estate investing.

  • Tax liens: Tax liens are placed on a property when the owner fails to pay their property taxes. These liens are usually handled by the government, and the property owner will need to pay the outstanding taxes plus interest to have the lien removed.

  • Mortgage liens: A mortgage lien is placed on a property when the owner takes out a mortgage to purchase the property. The lender has a legal claim on the property until the mortgage is paid in full. If the owner defaults on their mortgage payments, the lender can foreclose on the property and sell it to recover the unpaid mortgage debt.

  • Mechanic's liens: A mechanic's lien is placed on a property when a contractor performs work on the property and is not paid for their services. This type of lien is typically used by contractors, subcontractors, and suppliers to ensure that they are paid for their work.

  • Judgment liens: Judgment liens are placed on a property when a court orders the owner to pay a debt to a creditor. These liens can be the result of a lawsuit or a settlement agreement.

  • Voluntary liens: Voluntary liens are liens that the property owner agrees to in order to secure a loan or financing. An example of a voluntary lien is a car loan, where the lender has a lien on the vehicle until the loan is paid in full.

As a real estate investor, it is important to be aware of any liens that may be placed on a property. Liens can impact the value of the property and make it more difficult to sell. It is also important to thoroughly research a property before making an investment to ensure that there are no outstanding liens that could cause problems in the future.

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