What is a "lien" in the context of real estate?

A "lien" in the context of real estate refers to a legal right that a lender holds against a borrower's property. This right ensures that the lender can claim the property (or a portion of its value) if the borrower fails to meet the obligations of a debt, typically through loan repayment. In real estate transactions, liens are significant because they establish a priority for creditors over a property. If the borrower defaults on the loan, the lien allows the lender to enforce their claim through legal means, such as foreclosure or a sale of the property to recover the owed amount.

Understanding liens is essential, as they can greatly affect ownership rights and property transactions. For instance, when purchasing a property, buyers must be aware of any existing liens because these can influence the transaction and may need to be satisfied before ownership is transferred.