With Ebay and Craigslist, its very easy to find used tractors and equipment for sale at great price. But that great deal you found can quickly turn into a nightmare of problems leading to the possible loss of the purchase without the return of your cash. We can blame it on the economy or on what people have to do to survive these days, but its a fact, people are selling these non-titled tractors, gators, implements, or equipment that have liens against them to pay on their home or car. It is against the law for them to sell property with a lien and according to the paperwork signed at the original purchase when new, if the loan is not paid on, the lien holder can come get the equipment, no matter who has supposedly purchased it.
Many people will argue this, but if you buy something with a lien on it and the lien holder wants the equipment, there is little you can do to stop them from getting it. Its also very expensive to retain a lawyer to fight to keep what you purchased. Rather than going that route, lets look at what we can do to prevent ourselves from getting in that situation in the first place. This is not meant to be a legal how to, its simply guidelines that have been suggested to me from dealers and lawyers. Each state has different laws, so please check with people in the know in your state.
What I have learned from buying John Deere equipment is that liens are not always filed in the county they were purchased. JD Finance will file paperwork with the state and that will not always be found with a lien search. When looking for used equipment, do some research and ask some key questions before you purchase.
Take this information and call the original selling dealer. If you can get to the general manager or a good salesman, tell then that you are looking to buy this equipment with the VIN and that you were told it was purchased there by (sellers name). They should be able to look up the equipment to see if there was a lien on this when sold and also look with JD Finance to see if it currently has a lien. The original dealer also has a responsibility to help collect on the loan when done through JD Finance.
- Where did you buy the equipment from? Dealer name is very important in lien search!
- Was it new when you purchased it?
- Do you know about when you purchased it? Helps the dealer look up paperwork.
- Did or does this equipment have a lien against it? If its been paid off, can they provide proof?
- Write down the VIN, or ask for the VIN number.
- What is the sellers first and last name.
While this will tell you a lot about smaller tractors and equipment. Larger agricultural equipment might have had a loan through Greenstone or other government subsidised company and you might have to ask your bank to also do a search for you. If you are going to get a loan on the equipment, you can rely on your bank to do much of this for you.
When you get face to face with the seller, ask a lot of questions. If the person is selling something because they need cash for their home or to stop an item from being repo'ed, (run) or you could ask them to see the original bill of sale or paperwork showing they do not have a loan on the equipment. If you buy it, on the bill of sale, have the seller write out that they can legally sell this equipment and it does not have any liens on it. Have them print their name, address, phone number, date and then sign it. Keep that with a copy of the cancelled check. If something happened and it did have a lien, that is your only defense.
What if you are buying equipment from someone who did not buy the machine new? There might not be a direct way to trace it back to a dealer, or for your dealer to check for liens. In this case, there is little chance they are with a national finance company unless it was purchased from a dealer, so a county lien search done at your bank would be your main option. Running it by your dealer is also a very good idea.
While you will pay more to buy used from a dealer, you also have the protection that a lien cannot be pursued past them. In Michigan, my understanding is, if a dealer sells something with a lien on it, they are responsible. Dealers will have to pay the lien holder rather than the lien holder coming after the current owner.
Can we protect our-self in every situation? Probably not, but a little caution and research can save a lot of headaches later.