Contacted By Escrow Agent about Lien and Home Sale – Will We Get Paid?

2 years ago

We placed a lien on one of the project we were working on – All wide solutions, now this house was on the market to be sold, I have receive a call from escrow regarding this house now being sold. As us having a lien on it how is the process of them selling the house and us getting our money? It has taken us over 4 months to get paid on this project but now we have additional charges not paid.

CEO Levelset

This is a great question because it relates to the practical way that many liens get resolved, and since it’s handled so practically by escrow agents and others who deal with liens all the time, it can be confusing about how the process actually works. When a home or a property is sold, it’s very common for the escrowing and title agencies to have to deal with liens. In fact, they most commonly must deal with the “mortgage” or bank loan on the property, which is just another type of lien. The job of the closing managers (attorneys, title insurance, escrow, etc.) is to deliver a property to the buyer that is free and clear of any previous liens. So long that your lien is still valid, that will include your lien.

The escrowing agent frequently contacts lien holders to ask for the amount that will satisfy the lien. They will then include this as part of the closing process to “hold back” enough money from the sale transaction to satisfy that lien. It is then distributed directly to the lien holder, if all parties agree, or if there is a dispute, the escrowing agent will hold the money until the dispute is resolved.

So, let’s say you have a lien for $10,000 on a house and the house is being sold for $100,000. The escrowing company would get $100,000 from the buyer and will then deliver $90,000 to the seller. The escrowing company will hold the other $10,000 in trust for the lien holder. And either:

a. The buyer will agree, and the escrow company will send the $10,000 to the lien holder, which will remove the lien; or

b. The buyer will claim the lien is in dispute, and the escrow company will deliver the $10,000 to the county office, where they will be able to get the lien removed, but only in exchange for the cash. At that point, the lien holder can still “enforce the lien.” The only difference is that when the lien is enforced, instead of having to foreclose the property to get the $10,000 — which will take time — the lien holder will be able to just take the $10,000 in cash. Much easier.

So, in sum, this is a very good sign and a step in the right direction. There may soon be some light at the end of the tunnel. Stay in touch with the escrow agent to understand what will happen (i.e. a or b, as per above). And if b, start getting more aggressive on the enforcement to try and push the parties toward option a. Good luck.

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