Procedure to buy a car with a lien

[dakarwu]

I am interested in buying a used M3 but the problem is the car has a lien. I am sure the seller is going to use my money to pay off the lien. The problem is that I am purchasing it with a loan through my bank who would want the title. Does anyone know the best way to make this purchase happen without anyone getting burned?

[ShocknAwe]

I would start out by finding out who holds the lein.

[dakarwu]

My buddy told me to find out who has his lien also and potentially negotiate with them. Maybe this will make it smoother.

[Woodengun]

You don't negotiate with the lien holder. The lien holder owns title to the car until the debt is paid off. You have to get a new contract written so that once it is paid off the lien holder signs title over to you....right now even if you just gave them all the cash they would sign title over to the seller, not you.

[ddk632]

I sold my Ducati that had a lien on it and here's what we did. Some trust has to happen but absolutely, do not give the full money to the seller.

Agree on a selling price.

Then, have seller provide you with the info of the exact payoff.

Now I am not sure how the bank thing works, since mine was cash deal. But surely call the bank and they can explain.

The idea to not get burned is, the payoff on the lien gets paid directly to the lienholder. Any extra money beyond that gets paid to the seller in exchange for title.

The title will be sent by lienholder to current owner once payoff is received. He will then be able to sign it over for the remaining money (if any) on the deal.

My sale also included shipping the bike from FL to NV which made it even more fun but it worked out no problem in the end. I got title, mailed it to the guy and boom.

[Joekerr]

Why wouldn't you just negotiate a contract with both - whatever the lien holder is owed you pay directly to him and deduct from the proceeds you give to the seller.

I also would be "sure" as you say that the seller is going to use the proceeds to pay off the lien holder. What is his incentive to do so? I'd be nervous if he wants the whole proceeds and "promises" to pay off the lienholder.

[ddk632]

Originally Posted by Woodengun

You don't negotiate with the lien holder. The lien holder owns title to the car until the debt is paid off. You have to get a new contract written so that once it is paid off the lien holder signs title over to you....right now even if you just gave them all the cash they would sign title over to the seller, not you.

I've heard of this and it may be possible to do it, but seems elusive. When I sold my Ducati, the buyer mentioned this also, but the lienholder said that once payoff is received, regardless of from whom, they would send title to me and I would have to sign it over to seller. They were not aware of a process that would have enabled them to send title directly to the new owner.

[Flying Ace]

The key thing is you need to ensure that:
1. the title holder (the bank) is completely paid off, if you're a penny short on the payoff, the lien will not be released
2. the owner is satisfied with your purchase price to him.

Regardless of either scenarios, you need to negotiated a final purchase price with the owner.

Scenario 1:The negotiated price of the car is less than (or equal to) the outstanding loan amount [Owner owes $50k on car, you guys settle on buying the car for $40k]

1. Have the owner print out a buyout slip from the bank, this shows the remaining loan balance of $50k. You'll see that the loan balance is higher than the purchase price you negotiated of $40k.
2. You pay the negotiated price of $40k with a bank check to the bank.
3. The owner will pay the complete balance of the loan with his bank check of $10k to the bank
4. Make sure owner did his math right, if he is a penny short on his bank check, lien will not be released
5. You take both bank checks and mail it in yourself. It's best practice for both parties to review each other's checks, and collectively observe that the bank check for the loan is sealed in with the buyout slip, and dropped into a mailbox.
6. #5 above can be avoided IF you show up at the owner's bank, owner is present as well, and you each present your own bank checks to his banker who then will confirm that the entire lien is satisfied.
7. You take keys and car home.
8. Title company will send owner the title or give him option of who to send title to. Regardless the owner still will have to sign his portion of the physical title for the release and mail it to you.


Scenario 2: The negotiated price of the car is more than the outstanding loan amount [Owner owes $10k on car, you guys settle on buying the car for $40k]

1. Have the owner print out a buyout slip from the bank, this shows the remaining loan balance of $10k. You'll see that the loan balance is lower than the purchase price you negotiated.
2. You now pay with 2 bank checks. You cut a check for EXACTLY $10k the payoff amount to the bank. You then cut a check for the balance of the negotiated price to the owner, $30k.
3. Make sure you did your math right, if bank check is a penny short, lien will not be released.
4. Mail the bank check to the bank yourself. It's best practice for both parties will review your mailing of the check, and collectively observe that the check is sealed in with the buyout slip, and dropped into a mailbox.
5. #4 above can be avoided IF you show up at the owner's bank, owner is present as well, and you present a bank check of $10k to his banker who then will confirm that the entire lien is satisfied.
6. You take keys and car home.
8. Title company will send owner the title or give him option of who to send title to. Regardless the owner still will have to sign his portion of the physical title for the release and mail it to you.

[monkeybingo]

This is the only way you could make it happen.

First Step, get a copy of the Title from the lien holder.
Second Step, Tell your lender that this is the vehicle you will be financing.(presenting the copy of the title that is owned by another financial institution)
Third Step, Write two Check. One to the lien holder for the payoff amount and second to the owner for any excess.(assuming the purchase price is higher than the payoff amount). Hold the car with the 2 keys from the buyer so he doesn't drive.
Third Step, Once you have the actual title, get the title transferred to you.

Simple.

[Flying Ace]

actually, I missed the part where you're paying with a loan. In this case, call your loan company and ask them how they want to handle it. Sometimes, they prefer to handle the paperwork for the transaction, so they get mailed the title immediately. They simply just cut a check on your behalf or give you a check.

Every company handles it differently

[khaye1]

What you need to do is go to a dealer and do a "pass through" sale. Some dealer will know what this is, some won't. What it is:

the dealer buys the car from the seller in the condition that you will in turn buy it from the dealer. The catch for the dealer, you have to pay processing fee...anywhere from $250-$500. This is buy far the safest way for these kind of transactions. Nobody gets burnt. I've done it once and the process was smooth as silk. The dealer took care of all the paperwork including registration.

[mccannable]

Pass through is the way to go. I paid off a car I was selling. Made electronic payment(not wire). It took near 3 weeks for them to process then get the dmv to remove the lien.

[dakarwu]

The seller told me we can go to my bank and they will do all the necessary paperwork. Pay off his lender and everything. Which is what he did with the previous owner who financed through BMW. I need to confirm with my bank still. I plan on going from socal to norcal to purchase it and can only do it on a saturday so my window is kind of small. I just want to make sure this all can be within a day and I can drive the car back to socal.

[Joekerr]

Pretty sure they won't be able to provide you with title. So just make sure you trust the guy enough that he'll actually send you the title when it's paid...I wouldn't.

Have you talked to the lienholder? Maybe get the seller to give you the contact info and let them know.

[nissan]

You can go through an escrow service to handle the transaction. That's what I did when I sold my car which had a lien on it. Have the seller pay escrow fees (~$200). I used escrow.com.

[dakarwu]

I talked to my bank and what they said is once the seller gives me the required document (copy of title front/back, registration, lienholder information, 10 day payoff amount, etc...) I have to fax them to my bank and then they will payoff the lienholder with an overnight check and they will mail ME not the seller the title. I would then have to get the seller to sign the title and then follow the necessary steps provided by my bank to register my car. Now my problem is when should I pay him the difference between the lien amount and the actually amount he is selling for? After I receive the title or when he gives me the documents to fax. How would you feel if someone paid you the rest of the money when they get come back to you to sign the title off?