Pay Dirt Series – Dealing with Builders’ Liens

It’s always a nasty surprise for brokers when they find out that there’s a builders’ lien on a borrower’s title.  Borrower stories often entertaining including:

  • I didn’t know it was there;
  • I paid it;
  • They said they discharged it;
  • We negotiated a settlement.

Regardless of the reason, it needs to be discharged.   While the lawyers will sort out the details and discharge at closing, as a broker you’ll want to get all of the information that you can including:

  • When was it registered
  • What was the full amount claimed
  • Proof of any payments for the work that gave rise to the lien.

You can expect that lenders will typically underwrite the deal assuming that the full amount is still owing, together with some accrued interest.  So when you’re working out the net proceeds that a borrower will receive from a re-finance, it’s wise to use the full amount owing.  If it’s less, that’s a bonus for the borrower.