CHCP CHCP Lien & Encumbrance Resolution 2 — Questions and Answers
Question 1: When a closing agent discovers an outstanding judgment lien against the seller, the most common resolution at closing is to:
- Ignore it if the amount is under $1,000
- Pay off the lien from the seller's proceeds and obtain a release (Correct answer)
- Transfer the lien to the buyer's new mortgage
- Request that the title company insure over it without resolution
Correct answer: Pay off the lien from the seller's proceeds and obtain a release
Outstanding judgment liens are typically satisfied at closing from the seller's net proceeds, and the release is recorded to deliver clear title to the buyer.
Question 2: An IRS federal tax lien for unpaid taxes attaches to:
- Only real property in the county where filed
- All real and personal property owned by the taxpayer nationwide (Correct answer)
- Only property purchased after the lien was filed
- Only the taxpayer's primary residence
Correct answer: All real and personal property owned by the taxpayer nationwide
A federal tax lien under IRC Section 6321 attaches to all property and rights to property—real and personal—belonging to the delinquent taxpayer throughout the country.
Question 3: Which document does an HOA typically record to enforce unpaid assessments against a property?
- Deed restriction
- HOA assessment lien (Correct answer)
- Lis pendens
- Covenant violation notice
Correct answer: HOA assessment lien
When a homeowner fails to pay HOA dues or special assessments, the association may record an assessment lien against the property, which must be resolved before clear title can pass.
Question 4: A subordination agreement allows which of the following?
- A junior lien to move ahead of a senior lien in priority (Correct answer)
- The borrower to skip a mortgage payment
- A lender to foreclose without court proceedings
- The title company to issue a policy without a title search
Correct answer: A junior lien to move ahead of a senior lien in priority
A subordination agreement is a written contract in which a senior lienholder agrees to let a junior lien take a higher priority position, commonly used when refinancing.
Question 5: What is a 'lien waiver' in the context of real estate closings?
- A document releasing a contractor's right to file a mechanic's lien once paid (Correct answer)
- A title insurance endorsement
- A court order removing a judgment lien
- A borrower's waiver of the right to rescind
Correct answer: A document releasing a contractor's right to file a mechanic's lien once paid
A lien waiver is signed by contractors or subcontractors after receiving payment, surrendering their right to file a mechanic's lien for the work covered.
Question 6: If a property is sold at a foreclosure sale, which lien(s) are typically extinguished?
- All liens, including property tax liens
- Only the foreclosing lien and liens junior to it; senior liens survive (Correct answer)
- Only the first mortgage lien
- No liens are extinguished at foreclosure
Correct answer: Only the foreclosing lien and liens junior to it; senior liens survive
Foreclosure extinguishes the foreclosing lien and all liens junior to it, but liens senior to the foreclosing lien remain attached to the property.
CHCP CHCP Lien & Encumbrance Resolution 2
When a closing agent discovers an outstanding judgment lien against the seller, the most common resolution at closing is to: