A lien sale is a sale of an asset or its lien to recover debt, often seen with vehicles and real estate. Before the sale, legal authority must be obtained, notices posted, and inspections conducted. Buyers should inspect the property and research any pending privileges.
A lien sale is a sale of a lienable asset, or of the lien itself, to recover a debt. This is most commonly seen with motor vehicles and real estate. Before a lien sale can take place, the lender must have the legal authority to execute the sale and may need to post notices to provide information, depending on regional laws. Pawn sales can be a useful resource for lower cost assets, although the property is generally sold as-is and can be a risky purchase.
In some cases, lien sales involve direct sales of property. For example, a mechanic who performs repairs on a car and does not get paid for them has a lien on the vehicle and can sell it to recoup the costs after notifying the owner and spending sufficient time. Privileged sales may feature a number of vehicles bundled into one auction for efficiency purposes. Usually the property is available for inspection before the sale.
Other lien sales involve the sale of the lien, but not the asset itself. A common example is a tax lien, a lien placed on property for non-payment of taxes. The government can sell the lien to recoup the taxes, and the homeowner has a set amount of time to redeem the lien before the title reverts to the ownership of the lien buyer. For buyers, lien buying involves both recovering the money and interest owed, and gaining ownership of the property and being able to use or sell it.
When a lender prepares for a lien sale, they must send a final notice to the property owner alerting them that a sale is planned and providing information on what to do to avoid the sale. If the debtor does not respond or a resolution cannot be reached, the creditor can proceed with the sale. Creditors must be able to acquire ownership of the property before they can sell it in a lien sale, and it’s important to be aware that there may be other liens on the property that could tarnish the title; a car, for example, might have a lien associated with an auto loan and a mechanic’s lien for non-payment.
Buyers of a lien sale should inspect the property as thoroughly as possible and obtain an opinion from an expert appraiser if they are unfamiliar with the value and price of similar properties. It’s also a good idea to conduct some research to discover other pending privileges that could complicate the transfer of title.
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