What does "Free and Clear" mean?
When you hear the phrase, "owned free and clear" it simply means there are no liens on file at the county recorder's office and the owner owns the home free and clear of any encumbrances or liens. Really what it means is that there is no debt on the house.
Most people who buy property have to use Other People's Money or OPM to buy that property. This means the individual went to a bank for a loan so they could buy the property. The bank goes through its process of evaluating the risk of that loan by looking at two main areas.
- The credit worthiness of the individual based on past credit payment history, current job earnings and the amount of available cash.
- The value of the property which is usually determined by a licensed appraisal.
If the bank decides the individual and the property are both good credit risks, they will make the loan. Let's use a $100,000 property as an example to show you this process in more detail.
In our example, a buyer decides to buy a home for sale at $100,000. When the buyer contacts a bank to apply for a loan (the banks use the term, "qualify for a loan"), that buyer is asked to fill out lots of information on a loan application form. This information is used by the bank to determine the credit worthiness (or credit risk) of the buyer. If the bank determines the buyer is a good credit risk, they will move on to the next step of evaluating the property via an appraisal.
The bank will contact a trusted licensed appraiser (often one they have a prior relationship with) to conduct a detailed evaluation of the property's value in comparison to what other, similar properties are being sold for. The buyer's real estate agent can do something called a "comp analysis" which is something similar but not as detailed or in depth as that done by the appraiser.
The appraiser will actually make an appointment to visit the house and conduct a physical walkthrough to gauge such things as actual size of the property, number of rooms, above ground square footage and type of finish materials used. The appraiser will then make a detailed comparison of other homes in the area with a similar makeup in such things as size, style, age, square footage, view, lot size, layout and the like. The appraiser will take pictures both of the house (known as the subject property) and the other homes with similar attributes to include in their report. This type of appraisal is known as a comparison appraisal and is the type most often done on single family homes.
Once the bank knows the property has a value of at least the loan amount and once they know the buyer is a good credit risk, the bank will approve the loan and the new buyer will sign the mortgage documents (often done at a title company who helps the bank with all these details) and take ownership of the property subject to the liens the bank places against the property to protect themselves in case the buyer decides to default.
For more information about liens and mortgages please see the article titled, "Buying Properties for Pennies on the Dollar."
There are all different types of loans that banks make available to credit worthy buyers. For our example we will use a 30 year loan timeframe. A 30 year loan means the buyer has agreed to spread the loan payments over 30 years. Usually when the buyer signs the loan documents the loan is defined by months. So, for example, a 30 year loan is often described as a 360 month loan as each payment is calculated on a monthly basis over the life of the loan.
So let's say the buyer bought the house for $100,000 but was able to put $20,000 down from the sale of another home. This means the buyer will need to go to the bank to get an $80,000 loan which, in our example, will be paid back in monthly installments over 30 years.
At this point, the buyer is living in the home and in all ways has ownership of the home except for the lien filed against the property by the bank to protect their interest. This type of ownership, where the owner has a lien filed against the property is often called having ownership, "subject to" the amount of the lien.
Now let's say the buyer works really hard and is able to make extra payments over the years and eventually pays the loan off in only 20 years. Once the home has been paid off, the bank will file a document with the local county recorder's office showing the loan was paid off which removes the lien which has been recorded against the property for 20 years.
At this moment, the homeowner owns the property free and clear meaning their ownership is not subject to any other liens or encumbrances.
John Beck's proven tax lien and tax deed Amazing Profits system teaches you how to buy properties for little upfront money so that you can own these properties free and clear of any other liens. By owning these properties free and clear, you can afford to hold on to them for longer amounts of time if you wish to see a greater rise in appreciation and the value of the property. Or if you choose, you can sell these properties very quickly and make the full amount of profit because you don't have to pay some other company any interest or loan fees.
Building your retirement by buying lots of properties free and clear for just pennies on the dollar means your money works just for you and no one else. When you have to borrow money to buy or invest in properties, you have to pay a percentage of whatever profit you might earn on that deal to the bank in the form of interest rate payments and loan origination fees.
So learn John Beck's Amazing Profits Tax Lien and Tax Deed Real Estate program today and begin to invest in your financially "free and clear" future! The biggest scam in your life is to avoid doing something today that will make your tomorrows so much more carefree and the biggest ripoff is when people just go with the flow and let other's dictate their financial future. Take the bull by the horns and shape your own destiny.
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