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What Is a Lien Sale?
Let me explain what a lien sale really is. It's the sale of a claim or hold placed on an asset to satisfy an unpaid debt. You see these conducted as public auctions, typically on real estate, automobiles, or other personal property.
Depending on the laws in your state, contractors, subcontractors, and suppliers can place a lien on property they've worked on if they haven't been paid for their services.
Key Takeaways
Here's what you need to remember: A lien sale is about selling that claim on an asset to cover unpaid debt. Unpaid debts on a property can make the owed amount grow. Some people get protection against forced lien sales. These sales come in forms like property, vehicle, storage, and business. The local agency usually posts notices online and in newspapers. Governments set the interest rates for lien buyers, and they differ by state.
How a Lien Sale Works
If you're thinking about investing, buying delinquent tax liens at a sale is getting popular—it's like getting a long-term certificate of deposit, but you can't sell it back to the taxing authority; you hold it until it's repaid. I advise you to learn the details before jumping in. Redemption usually happens at a set rate of return within a timeframe.
When liens for unpaid property debts are sold, often by local government, the amount owed can increase. The buyer might use a servicing company that adds fees and interest, so the debtor pays more, giving the buyer a return.
You'll often get several notices before the auction date is set. Even if you owe taxes or fees, exemptions might protect your property—think disabled homeowners, seniors, veterans, or active-duty military. Each area has its own rules, applications, and deadlines.
There are limits on interest rates lien buyers can charge; these are set by the government and vary by state. Bidding is auction-style, highest bidder wins, but with rate caps, the purchase price matters a lot.
One important note: Buying a home with a lien brings complications.
Types of Lien Sales
There are different types of lien sales, each targeting specific assets. In property lien sales, a claim goes on real estate or land for unpaid debts or taxes. Vehicle lien sales put a lien on cars, motorcycles, or boats. Storage unit lien sales happen when rent isn't paid, and the contents get auctioned to cover fees.
Additional Types of Lien Sales
- Mechanic's lien sales: This is when repair work on a property or vehicle isn't paid for, so the mechanic places a lien.
- Business lien sales: If a business defaults on loans, its assets can be sold to settle debts.
- Agricultural lien sales: In farming, liens might be on crops, livestock, or equipment due to unpaid debts.
Example of a Lien Sale
Picture this: A tenant can't pay rent on her storage unit. The facility sends a lien notice about the overdue amount and the lien on her items. She gets a redemption period to pay up, but she doesn't. Once that expires, they hold an auction where buyers inspect from outside and bid. The highest bidder takes the contents.
The auction money covers the rent, fees, and costs. If there's extra, it might go back to the tenant, making the facility whole.
Special Considerations
If your property is facing a lien sale, you can often remove it by arranging payments to catch up on the debt. Procedures vary—for example, a high-value vehicle auction differs from a storage unit sale. Notices are posted online or in newspapers by the local agency.
What Triggers Judicial Lien Sales?
Judicial lien sales start with a court order, usually from a judgment or debt. The court allows the sale of property to pay the creditor.
What Rights Do Property Owners Have During a Lien Sale?
You, as a property owner, have rights like getting clear notices, a redemption period to pay and reclaim, and possibly contesting the sale.
Are There Redemption Periods in Lien Sales, and How Do They Work?
Yes, redemption periods let you pay the debt and keep your property before the auction. The length depends on the lien type and local rules.
The Bottom Line
In the end, lien sales are a legal way for lienholders to sell your property or assets to recover debts. It involves placing the lien, sending notices, auctioning, and using proceeds to pay what's owed.
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