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In our last email, we discussed the importance of looking at the title early in the selling/buying/mortgaging process. I won't go into it again because you can review it here, but I wanted to look at builders' liens from another angle.
So, you are a careful Realtor or mortgage broker/lender. Early on in the process of helping your client, you pull a copy of the title, and you find a builders' lien. Apart from the issue of having that lien removed from the title, what else might be going on? What else should you consider?
It's important that you do a deeper dive into WHY the builders' lien was filed.
It's one thing if the homeowner and builder/supplier are having a dispute about money. But what if it's a serious dispute around the quality of the work?
Listing Realtors
Typically a quality of work dispute will be revealed as the sale process moves along. Don't get blindsided by a home inspection where you're just hoping for the best. It's better for you to find out the details of the quality issues early in the listing/selling process. If your seller chose a bad builder who did a crappy job, better to know upfront. Give your seller realistic coaching about what a careful buyer will require. And remember the seller's obligation to disclose 'latent defects.'
Selling Realtors
What if the builder did a crappy job? Even with a great home inspection, it can be challenging for a buyer to nail down the issues and determine whether they are fixable. You might consider having your seller get their own home inspection report. Or, in serious situations, you might consider getting an engineer's report. The seller will probably have the engineer or home inspector work closely with a contractor to carefully review and consider the details and cost of the fix-ups.
Mortgage Brokers/Lenders
If the builders' lien is due to a quality of work dispute, how might that affect your lender's security? Find out early so that you avoid that late call from the underwriter. You don't want to hear that the underwriter wants all the details on the builders' lien just before closing. And, when it turns out the dispute is around a compromised foundation or other major problem, the mortgage will be declined.
Protect yourself.
Cheers,
Barry
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