Liens and Loans – Liens Stay With the House, Debt Follows the Person –
When you buy a home and sign the home loan documents, a lien will be created and filed with the County Tax Assessor. The home becomes collateral for the home loan. The lien restricts you from selling the property to someone else, without first paying off the home loan, taxes, and any other encumbrances.
Lien and Loan Hierarchy
Government liens such as income tax and property tax liens always take the first position in the lien hierarchy. For example, if you have a first and second mortgage, then have a government tax lien (because you didn’t pay your personal income or business taxes) the lien hierarchy will be as follows: First Position: Tax Lien Second Position: First Mortgage Third Position: Second Mortgage
Transferring the House to a New Buyer
Before you can transfer the house to a new owner, all of the liens on the house must be satisfied (paid.)
The new home mortgage loan that the new buyer takes out will hopefully pay all of the encumbrances (existing mortgages, any other liens, commission to sell the house, property taxes, delinquent HOA fees if any, etc.) on your house.
Paying Out of Pocket
If the new mortgage the buyer takes out will not cover all of the encumbrances on your house you will have to pay the deficit out of pocket before the property can be transferred to someone else.
If you cannot pay the deficit out of pocket, the sale of the home will not go through at the time of closing, and you’ll have to resolve the issue by either borrowing the money from someone to pay the deficit, continue living in the house and resume making the monthly payments, let the home go into foreclosure and/or file bankruptcy.
Debt Follows the Person(s)
When you and your spouse signed the loan documents for the house, you both committed equally to paying off the loan. If you are planning to divorce and your soon to be ex-spouse intends on keeping the house you both will continue to be responsible for the home loan you both signed years ago, until the house is paid for.
If you are planning to divorce and your soon to be ex-spouse intends on keeping the house you both will continue to be responsible for the original home loan until the loan is paid off, either through a refinance or sale of the house.
Just because you give up your rights to the house (see our information on the Quit Claim Deed Nightmare) does not mean you are released from the mortgage!
If your soon to be former spouse keeps the house and they cannot make the house payments or cannot refinance the house on their own, you both will be attached to the home loan until it is paid in full.
Know Your Liens and Loans Options
Should you sell the house? Can one of you refinance the house on your own? What are your options?
We also recommend you have a consultation with our real estate professionals so you can understand all of your options.
WHAT WE DO:
We specialize in helping couples who plan to divorce avoid making expensive and long-lasting mistakes with the marital home.
We help attorneys, paralegals and mediators gather information and documentation to enhance their divorce case files.
HOW DO WE DO THIS?
We do this by helping people completely understand all of their options with the marital home including keeping the home, selling the home, mortgage and refinance options, and explaining why home due diligence, updated credit reports, and title searches are so important.
We explain to our clients how their decisions with respect to the home can impact their quality of life for many years to come.
We help our clients prevent credit damage and preserve their ability to buy a home in the future.
With the information we can provide families can make better decisions and perhaps avoid making expensive and long-lasting mistakes.
Our initial pre-divorce consultations are provided at no charge.
HOW DO WE HELP ATTORNEYS AND MEDIATORS?
If you use appraisals in your practice to help determine the value of a home we can show you at least two gaps in the case file that can be detrimental to your clients.
We’ll explain why house due diligence is very important to determining actual value.
We’ll explain why a CLUE report should be part of your case file.
Our title company partners can provide title and lien searches on the property so no unexpected surprises surface during the process.
We can confirm equity in the house, check for mechanics liens and check to see if there is a home equity line of credit (HELOC) that has the potential of decreasing the equity in the home.
Our assistance helps you gather the details you need, creating less busy work for you and your paralegals.
The information we produce can bring about more cooperative clients.
WHY DO WE DO THIS?
We provide our initial pre-divorce consultations at no charge.
We provide our initial information for attorneys, paralegals and mediators at no charge.
We do this in the interest of consumer protection, helping our clients protect their credit ratings and preserve their future home ownership capabilities.
If the couple decides to sell the marital home we hope that our information has been helpful and they will consider us for the listing and mortgage or refinancing of the home and/or new homes.
Less than 1% of all real estate agents, mortgage loan professionals, and title professionals have the Real Estate Collaboration Specialist - Divorce (RCS-D) designation. Agents without this designation could just be guessing how to advise you through this difficult time, we'll give you the facts that only professionals with our specialized training can provide.