Municipal Lien Report: Why It’s Crucial in the Mortgage Closing Process
During the home purchasing process, many unforeseen issues can arise, leaving many potential buyers confused. One common challenge involves the requirement for a municipal lien report, which moves from an initial "clear to close" status to a full auditing process.
The Role of a Municipal Lien Report
The municipal lien report is a crucial document that ensures all property-related bills, such as water and sewer utilities, are current and up-to-date. These charges, known as liens, attach to a property and become the responsibility of the current owner. If these charges are not settled, the property's title may be compromised, affecting future homeowners.
The municipal report serves as a verification process that confirms there are no overdue payments or arrearages. Closing attorneys and title offices require this report to ensure the property is in good standing. Any outstanding debts must be cleared before finalizing the mortgage loan to protect the buyer's financial interests and secure a clean title.
Why the Change from "Clear to Close" to Requiring a Municipal Lien Report?
Technically, once a loan is deemed “clear to close” (CTC), all known conditions have been satisfied. The title company and the lender have agreed on the closing disclosure. However, the lender still conducts pre-closing and post-closing audits to ensure all requirements are met.
The addition of the municipal lien report is a result of additional verifications needed to finalize the mortgage. These verifications can uncover issues that were not previously identified. For instance, the seller might have overlooked unpaid property taxes or utility bills, leading to potential liens that could jeopardize the new property's title.
Complexity of a Real Estate Closing
A real estate closing involves numerous steps and numerous people, each responsible for different tasks. Human errors can occur, and sometimes information can be overlooked in the rush to move forward with the closing process.
Common issues that might arise include:
Unpaid property taxes or utility bills, Previous liens or encumbrances on the property, Errors in title searches.While these problems can cause stress for buyers and sellers alike, they provide an opportunity for thorough due diligence and transparency. The reported issue(s) are resolved before the closing, ensuring a smooth transaction and a clean, clear title.
Conclusion
The municipal lien report is an essential document in the mortgage closing process. It ensures that all property-related bills are current and verifies that there are no outstanding arrearages. While it may seem like an additional step, it is crucial for protecting the buyer's investment and ensuring a smooth closing without any unexpected issues.
Despite real estate transactions being complex, with multiple parties involved, these issues can usually be resolved quickly. If you encounter any challenges during the closing process, it is important to remain communicative with all parties involved to ensure a successful and stress-free home purchase.
Contact Information
Martin Straka
NMLS #589189
973–598–5006