When selling your home, it is important to be able to convey marketable title. Marketable title is a title free from encumbrances and any reasonable doubt as to its validity. Some of the factors which can affect the marketability of title are various statutory liens. Some of the most common ones include:
Existing Mortgages. All recorded mortgages will act as a lien against the property. This includes any home-equity loan and lines of credit which are secured by a mortgage in addition to primary mortgages. Payoff statements can be obtained from the lender prior to closing so that the mortgage lien can be paid off from the closing proceeds. It is important that home-equity and line of credit accounts be terminated prior to or at closing and representations be made by the borrower that no additional withdrawals have been made beyond the amount indicated in the payoff statement.
Existing Judgments. State and Federal judgments entered in New Jersey state courts or Federal District Courts of New Jersey will act as liens against the property. This is because all real estate is liable to be levied upon and sold by executions to be issued on judgments obtained in any court of record of New Jersey for the payment of money when the judgment is properly docketed. Judgments can be discharged by Court order, filing a warrant of satisfaction with the appropriate county clerk which is signed by the judgment holder or his attorney of record which authorizes the county clerk to satisfy the judgment of record, or by the acknowledgment of satisfaction on the record by the county clerk after the sheriff or other officer returns an execution of judgment issued as satisfied.
Real Estate Taxes and Assessments. Municipal real estate taxes, as well as municipal improvement assessments, water charges and sewer charges all act as liens against the property and must be paid off at closing. In addition to a search for municipal liens, a buyer should also perform a search for prospective assessments. This is because municipal improvements are not liens against the property until the property is actually assessed. However, this may be long after the improvement has been completed and the assessment passed.
State and Federal Tax Liens. Liens can be imposed against a property for various death taxes, i.e., New Jersey Transfer Inheritance Taxes, New Jersey Estate Taxes and Federal Estate Taxes incurred as a result of a homeowners death. These liens can be discharged upon the payment of the taxes, if any, and the issuance of a tax waiver or discharge of lien from the appropriate taxing authority.
Whether you are a seller concerned about what debts have to be paid at closing or a buyer who is seeking title to a property “free and clear of any liens” it is important to know to what extent such liens affect the marketability of title to your property.