Does a lien ever prevent a sale?

[Michael R.]

Are there any liens that would prevent someone from selling a property? I know property tax liens stay with the property. What about mortgages? Can you sell a property with a 50k mortgage for 1,000$ dollars and not satisfy the mortgage just quit claim it to a new buyer? What would happen in this case? I am looking at a rental property that is dirt cheap but has mortgages on it from 2002 that are in the 50k range. Owner filed bankruptcy a year ago but they are still showing. I am thinking about taking a gamble on this property and taking it with the liens. Are there any other liens that would prevent transfer of deed to a new owner? Federal IRS liens maybe?

[Steve Babiak]

The correct answer is: you can take any property "subject to" all liens and encumbrances, and those can be liens of any kind (tax, IRS, mechanics, municipal, mortgage, state revenue dept, etc). By doing so, you don't have "clean title"; if such a transaction required title insurance, the title insurer would list all liens of record that remain unsatisfied as uninsured / exceptions / exclusions on the title policy. You would then be on the hook to cover these liens, in the event that you would want to clean up the title. So, if the liens total more than what you feel the property's value is to you, then just move on to the next property.

There is much info already posted on BP forums on "subject to" - but usually the questions pertained to taking on just mortgages. With respect to mortgages, the topic usually ends up wondering about violations of the "due on sale" clause in mortgages.

If you need a loan to purchase, then your lender will require title insurance, and that lender will probably not be happy to have those other liens in place in a superior position (with respect to foreclosure).