The truth is -- most buyers aren't aware of what a municipal lien search is. We know this because there are still title agents who don't know what they are (they're out there, trust me) and even more real estate agents who have never heard of this search.
One hurdle that a lot of our clients had to get over was explaining it so that a cost-conscious buyer sees the value of a Municipal Lien Search. Our goal is to arm you with tools to help buyers understand and make them smarter and savvier consumers. The following bullets provide you with the basic talking points.
"What is a Municipal Lien Search?" (Quick Answer)
Have you ever been asked this question? I could tell you in a series of pLog posts, but the simple way to explain it is this:
Checking with various city and county departments to see if there are unrecorded financial or permit issues that will stick with a property after it's sold. These are liens and fines that will not be found in a county's clerk of the court.
What kind of issues will stick with the property?
Of course, your title search will discover any true liens, which are recorded with the clerk of court, but a municipal lien search is really looking for outstanding debts that may or may not result in a lien -- but are expected to be paid by a new owner. By nature, they're significantly harder to track down and can carry really big risk if left undiscovered.
- Code enforcement violations - When owners don't follow ordinances, code enforcement departments will fine them. Some fines accrue daily and will never be recorded as a lien, but keep totaling up until the issue is corrected. This is especially common on "problem properties" like short sales or foreclosures. Common code enforcement violations Include unmowed lawns, abandoned/neglected vehicles, not clearing yard waste, and many other things depending on the municipality.
- Unpaid utilities - Whether or not a municipality will lien for unpaid utility balances is up to the municipality. However, if you're purchasing a home and inheriting an outstanding water bill of $1,500, they expect YOU to pay it. Wouldn't you want to know if you were walking into someone else's debt before buying a property?
- Special Assessments - If a previous owner missed payments on a municipality's special assessment, it's going to be a new owner's responsibility if you aren't checking for it before buying.
Why is a 3rd party like PropLogix needed?
Your title agent is juggling so many parts of the closing, and companies like PropLogix specialize in looking for these issues. Experts will know WHERE to go for the information, exactly how to ask, and have developed relationships with municipalities to help get it back as fast as possible.
There is no standard for how each municipal department records this information. If it was simple, everyone would do it.
Plus, if we miss something, we're going to back it up with our $2 million E&O policy.
Can't I do my own property debt search?
You could certainly do it yourself, but as I mentioned above, it's a lot safer to leave this up to the experts than to take on the risk yourself. Every state, county, and city is different in how they handle property debt. In Florida, the issue of unrecorded municipal liens and fines has caused huge headaches for new owners. While in New York, a woman was slapped with a huge utility bill that would have been discovered if a utility request had been made prior to purchase.
It's best to consult trusted real estate professionals in your area for guidance in addition to doing your own real estate due diligence before making the biggest purchase of your life. Requesting an unrecorded property debt search might add a little extra cost up front, but it could end up saving you so much more in the long run.