“Hi Mary, we finally finished unpacking, we love our new home, but someone from XYZ Roofing Company knocked on the door today and said they put the new roof on the house and they haven’t been paid. They’re going to put a lien on our home! Can you please help us out with this?”
Now, this didn’t really happen to me, but imagine being the happy new homebuyer with this news that the roof has not been paid for and a lien may be filed, or imagine being their agent…here, have a TUMS.
It’s so important to get paid receipts for work that has been done prior to a real estate closing and also to pass along any warranties that would extend to the benefit of the buyer.
In Colorado, if suppliers or workers are not paid they can file a lien on the property. There are time periods to file and time periods to pursue collection through legal means; that’s the simplified version of a complicated legal procedure.
When I worked for the title company many years ago, we had a title claim because the sellers simply “forgot” to pay for all the new windows in the house! The window company was threatening the new owners with a lien, too. Forget the TUMS, if you were the buyer this might temporarily drive you to drink!
I’m not an attorney, I’m a real estate agent, and there are a few things that real estate agents can do to help protect their buyers (1) ask for the paid receipts for work that has been done prior to closing or present the invoices to be paid at closing and (2) always ask for the Owner’s Extended Coverage on the buyers Title Insurance Policy. Owner’s Extended Coverage insures the new buyers against “mechanics liens, or right to a lien, for services, labor or materials”….i.e.: new roof, new windows, new paint, …etc.
It’s funny how this small additional premium for the extended coverge ($50.00- $75.00) sometimes turns into a point of contention between buyers and sellers. If we ask the seller to pay and they refuse, then I urge the buyer to go ahead and pay for it. It’s a one-time fee and definitely worth it when the roofer knocks on your door!
The way I understand it, the big difference in having Owner’s Extended Coverage, (in this scenario), is that (1) the Owner’s Title Policy insures over mechanics liens and (2) the Title Insurance Company has a “duty to defend the buyer’s title” in any court case based on that mechanic lien; without OEC, the policy does not insure over mechanics liens and the buyers would need to hire and pay for their own representation.
When my buyer gets Owners Extended Coverage, I believe they have the best coverage available and less risk.
When I get paid receipts, the buyer has less risk. I know the workers are being paid and that’s important to me too.
No troubles- No TUMS
And no drinking…unless it’s to celebrate another happy closing!
I work in Northern Colorado; customs, laws and even title insurance may be different where you live.
Mary Douglas, your Mountain Broker-Associate and REALTOR®
United Country Ponderosa Realty, Red Feather Lakes, CO
www.marydouglas-redfeatherlakes.com ---970-231-5756
“A Day in the Mountains will always soothe your city soul”
The information contained in Mary’s blog is deemed reliable but is not guaranteed, and the opinions and views expressed in these articles are solely those of the author.
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