Lien Sales 101: Everything You Need To Know Not to Lose Your Car

August 25, 2022
Advice, Automotive

Most people know about lien sales but there’s more to it than just selling a property if you have any unpaid debts. The rules and regulations must be understood to know what steps to take whether your property is under a lien sale or if you’re going to purchase one. Lien sales are not exclusive to real estate as they include automobiles and other personal property. If you are new to lien sales, here’s everything you should know.

What Is a Lien?

A lien is a legal right or claim against personal properties that ensure the lienholder can use them as collateral to satisfy a debt. Legal authorities like governments and creditors have the right to establish a lien. Liens are made to satisfy underlying obligations between two parties or more, not necessarily a debt or a payment. If the obligations weren’t met, the lienholder can seize the property. The types of liens are statutory, judgment, and consensual.

What Is a Lien Sale?

A lien sale is when a lienholder, not the owner, puts a property for sale in a public auction to pay off the debt of the property’s owner. The property can be a house, a car, or any other personal property that is not fully paid or with unpaid taxes. The lienholder can be the government, agency, or person. On a lien sale, the lienholder sells the property to the highest bidder, and if it’s not sold, the lienholder takes possession of the property.

Who Can Conduct a Lien Sale?

Many entities and individuals can do a lien sale if they are lienholders. The government can conduct a lien sale if the property owner has unpaid taxes. A financial institution has the right to do a lien sale when the owner has unpaid debt they’re not willing or able to pay.

For vehicles, a mechanic or repair shop can trigger a lien sale if the owner didn’t pay for their fees. If a vehicle was abandoned on private property, the property owner can do a lien sale to remove it from their property. When law enforcement deems a vehicle abandoned, they will conduct one.

How Does a Lien Sale Work?

The rules and regulations of each state are different and you must know them before engaging in a lien sale. There are different types of liens that make the lien sale process different from one type to another. However, they share some similarities as the property must be listed and advertised publicly before the sale date. The advertisement should include the property owner, description, and amount of debt.

The property owner must be notified of the lien sale beforehand. The lien buyers can be agencies, financial institutions, or individuals who bid the highest in an auction. If there isn’t an auction, the collection agency assumes possession of the property. After a sale, the lienholder can add interest on the debt until it’s paid up. However, if the debt isn’t paid, the lienholder will foreclose on the property.

Is Investing in Lien Sales Worth It?

Many people and organizations are interested in investing in lien sales because they get to buy cheap properties and make a profit out of them. However, you should be aware of all the benefits and risks of lien sales. You can diversify your investment portfolio with lien sales without managing real estate which can be time-consuming. The risks are that you can pay additional costs as legal fees and the property owner might not pay their debt. Even if you foreclose the property, it can be in a bad condition and you’ll pay a lot of money to repair it.

How to Get Rid of a Lien?

The obvious way of getting rid of a lien is to pay any debts, taxes, or fees that can trigger a lien sale. Check with a local assessor’s office for any hidden liens you might not know about. Some individuals have protection against lien sales on their properties such as disabled owners, veterans, active duty military personnel, and senior citizens. Each jurisdiction has its rules, regulations, application process, and exceptions so make sure to contact the legal authorities to know these rules.

Knowing about lien sales whether you are a property owner or an investor will let you make better decisions when it comes to liens. It’s vital to know the lien sale process to know your rights and what to do during it. The debts are not erased when you make a lien purchase so you should always consider that, the other expenses, and any other fees.