When you buy a foreclosure, check to see if there are any contractor's liens against the property that have survived the foreclosure. Often, the lender will wipe out all other subordinate liens, including contractor's liens, in the foreclosure process. But in some cases, those liens may still exist and be valid. If you suspect there might be other liens that will be filed against the property even after you close, be sure to purchase a title insurance policy with coverage over contractor's liens. You will want to have this insurance in place to have a title company cover the costs of litigation and the costs to remove the contractor's liens with the purchase of the title insurance even if you bought the property after a foreclosure.

Q: I am in the process of buying a new home. It’s a foreclosure. The lender foreclosed on the developer.

In doing my due diligence on the purchase, I noticed some contractors were not paid. Will these contractors be able to put liens on the house after I close on it?

A: The short answer is yes. Most contractors can put a lien on a home -- a contractor's lien -- when they have been hired to perform work on a home and they are not paid. In some states, contractors have a certain amount of time to put a lien on a home. Some states even require contractors to give the owner notice of the lien before the lien can be effective. Each state has its own contractor’s liens statutes and they can be quite complex.

Now that you know that contractors can lien your property, you also need to know a bit more about liens and the lien holder’s rights.

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