What refers to the order in which debts are paid when property is sold through a court?

The concept of "Priority of Liens" refers specifically to the hierarchical order in which claims against a property are settled when that property is sold, particularly in a court-ordered sale situation. This principle is crucial in real estate as it determines who gets paid first from the proceeds of the sale of the property.

Liens can arise from various obligations such as mortgage agreements, tax debts, or contractor claims. When a property is sold to satisfy these debts, the lienholders are paid in a specific sequence based on the priority established when the liens were recorded. Generally, first mortgage liens take precedence over second mortgages, followed by tax liens, and then any other subordinate liens.

Understanding the priority of liens is essential for real estate professionals, as it influences negotiations, property values, and the overall financial implications of a property transaction. This knowledge is critical for making informed decisions about buying, selling, or investing in real estate.