Lenders and property buyers have the same concern with regard to the title. They want to make sure that it is clean and defect-free, or at least reasonably clear. Mortgage lenders and property buyers will seek to avoid all encumbrances that may affect their interest in the title. The first mortgage lender wants to be sure that it has the first lien position (after the real estate taxes) on the title; the second mortgage lender wants to ensure that it has the second lien position.

Liens, easements, deed restrictions and other encumbrances against a property restrict how property can be handled, owned and transferred. Thus, if the property owner owes taxes or has defaulted on a loan, a lien for that debt can be recorded against the property. The "Marketable Title" article discusses this issue in depth.

If the current owner does not or will not eliminate these liens, he or she may still be able to sell it. But it would be difficult. The new buyer would have to agree to accept the existing liens and encumbrances. If the new buyer will be using a mortgage loan to buy the property, the first mortgage lender will normally require that all liens be paid off before or at the closing.

Claims against the property, such as liens, follow certain rules:

  1. Legal recording of liens.
  2. Order of liens.

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