There are several foreclosed properties available for purchase, even when the real estate market is healthy and homes are appreciating in value. Purchasing a foreclosed home can be a good way to purchase a home for less than market value, but there are a few risks and some downsides to purchasing a foreclosed home. One of these downsides is purchasing a foreclosed home with a lien.

Liens on Foreclosures

Not all foreclosed homes will be free of any charges owed pertaining to the property. There are several different types of liens that can be on a home and may not be fulfilled and paid off by the foreclosure process. This can be property taxes, second and third mortgages, creditors, and more. These liens can have the ability to demand settlement from the new property owner.

Related: Understanding local and state foreclosure laws when purchasing a home

Lien Survivability

Seniority rankings attached to property titles allow property liens to stand through a foreclosure. Property tax liens hold priority over all other liens though, regardless of seniority. When a mortgage lender forecloses on a property due to the borrower’s missed payments, the lender’s only interest is to recover as much money owed as possible. If there are other liens on the property it is rare that there is money in the sale of the home to pay them off as well. This means that some liens could still be attached to the title of a property.

Clearing Liens

In a small amount of cases, proceeds from the sale of the home are applied to other liens on the property. The simplest way to get rid of liens on a property is to pay them, though it can be costly. Some foreclosure buyers seek out quiet title lawsuits to take care of other outstanding liens. If a lien holder does not object or fight in court or if they lose the lawsuit, this will effectively eliminate existing liens on the title.

More: How to Investigate liens on a property

Finding Out if a Property Has a Lien

Unfortunately, liens are attached to property titles, not the people that created the issue in the first place. It is a very good idea to do your own research on a home or enlist some help to do research. Investors who are in the business of purchasing foreclosed properties will often conduct a property title search on a home before making an offer. This does come with a cost though. A title search on a home can cost as much as $300. In this process, it is good to find out if a home has a quitclaim deed or regular deeds that will not guarantee a clear title.

More: Buying a home after a short sale or foreclosure

If you have never purchased a foreclosed home before it is an excellent idea to hire an experienced real estate agent to help you out.

For more information on homes for sale in Noblesville and other areas of Central Indiana please contact us any time.

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