Does settlement of an HOA liens wipe the slate clean?

Question

A house in Missouri was being sold and the owner wanted to negotiate a lower payment to settle the HOA liens because the buyer would not offer him enough money to cover both the HOA dues and the mortgage.(The amount offered actually wasn't enough to cover either amount in full)

The HOA liens was filed prior to the mortgage, which is owned by a private mortgagee, not a bank. The mortgagee had recently filed a new mortgage that replaced prior mortgages, after the HOA had already filed its liens. So I know the liens takes priority over the mortgage at this point.

The HOA agreed to a payout to release the liens that was lower than the total balance on the account.

Does that remaining balance disappear with the liens settlement and release, or does the difference between the amount paid to release the liens and the original account balance remain for the new owner?

Answer 1

A lien is used to prevent sale of a property until a debt is paid. This has nothing to do with priority over a mortgage.

The HOA agreed to release the lien for some payment. The negotiation of that payment doesn't matter to the new buyer. Once the lien is released, then it is no longer listed with the county on the property, so the property can now be sold. The former lienholder cannot now apply a new lien to the property because the new owner is not a debtor to the former lienholder. This would be a terrible way to manage property sales, and no mortgage company would allow a mortgage for a property that could not be sold in case of foreclosure, which is likely why the mortgage holder was a private individual.

It is possible for a new owner to take on existing liens, but this would be clearly spelled out in purchase documents. There should be a statement on the title search results that no liens exist.