TEXAS – On Thursday, we shared the story of a company that’s allegedly tricking Harris County homeowners into signing 40-year listing agreements—contracts that many claim they didn’t fully understand.
So, what rights did these homeowners give up for just a few hundred dollars?
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During our investigation, hundreds of Harris County homeowners have signed contracts with MV Realty over the past three years. These contracts lock homeowners into a 40-year listing agreement that can be enforced by liens. This means they would have to use MV Realty if they decided to sell their home, and canceling the agreement could cost them a hefty 3% of the home’s value.
READ: Company accused of duping Harris County homeowners into 40-year listing agreements
What is a lien?
A lien is a legal claim against a property that gives a creditor the right to seize and sell the property to recover an unpaid debt
Liens can either be voluntary or involuntary. A voluntary lien occurs when you take out a mortgage to buy a house, while a third party imposes an involuntary lien. For instance, the government can impose a lien on your home if you fail to pay property or income taxes.
Liens can significantly affect your credit score, hinder property sales, and even lead to foreclosure if left unresolved. While voluntary liens are part of most standard loans, involuntary liens can pose greater challenges, particularly when they occur without the property owner’s consent.
Different types of liens
Mechanic’s Lien
So, what’s a mechanic’s lien? It’s a legal claim that can be attached to your property if a contractor or mechanic does work on it and you don’t pay them. Think about it this way: if a mechanic fixes your car or a contractor installs a furnace in your home, and you skip out on the bill, they can place a lien on your property.
Here’s how it works: if you decide to sell your property without paying the service provider, that lien acts like a security interest. This means the creditor can claim a portion of the sale proceeds to cover the debt you owe them.
But here’s the catch: if there’s a mechanic’s lien on your property, it can delay or even stop the sale until you pay off the debt and get the lien removed. So, it’s something to keep in mind.
READ: Texas bills seek to end predatory listing agreements
Mortgage/ Deed of Trust Liens
Let’s talk about mortgage liens. These are voluntary liens that come into play when you take out a loan to buy a home or other property. They’re tied specifically to the property you’re mortgaging.
If you fall behind on your loan payments or break the terms of your loan agreement, the lender has the right to foreclose on your property. That means they can take possession of it to recover the money you owe.
To get rid of this lien, you’ll need to pay off the mortgage in full.
Judgment Liens
Let’s say you find yourself in a lawsuit and, unfortunately, you lose. The court will issue a judgment that specifies what you owe to the winning party. If you don’t pay this judgment, the creditor, who is the person who won the lawsuit, can place a lien on your property.
In Texas, these judgment liens can stick around for up to 10 years, which means they can affect your property for quite a while. So, it’s something to take seriously if you ever find yourself in that situation!
Estate Tax Liens
If estate taxes aren’t paid on assets that have been passed down after someone’s death, the government can issue what’s called an estate tax lien. These are involuntary, general liens meant to secure payment for any outstanding taxes owed.
Now, here’s something to keep in mind: Texas doesn’t have a state-wide estate tax, so you won’t have to worry about that at the state level. However, you or a family member might still be responsible for federal estate taxes. So, it’s important to be aware of any potential tax liabilities that could come into play.
Attachment Liens
An attachment lien is a legal hold placed on someone’s property to stop them from selling it while a legal matter is still in progress. You’ll often see this type of lien in situations like divorce or bankruptcy proceedings, where it’s important to prevent selling the property until everything is sorted out.
Attachment liens are involuntary, meaning the property owner doesn’t choose to have them. They can be either general, which means they apply to all of the owner’s property, or specific, which means they only apply to certain items. So, if you find yourself in a legal situation, it’s good to know how these liens work.