Hello, we are in contract to purchase a single home which is in short sale. The seller, and both lenders have approved the sale. We have ordered inspections and very close to closing. I just made tentanive arrangement for the termite treatment/tenting because we had reasonable expectations the we were going to close within a couple of days. Tonight I have received a call from our agent, who has explained that he has received a call from the sellers agent indicating that one of the owners of the property (there are two unrelated owners are on this property) has a judgment against her, and that we cannot close escrow until the judgment is settled. Wow!!! Since we have a binding contract signed by both sellers, and the banks, there are no leans against the property, does this seller have a legal ground and ability to stop or hold up the close of escrow? If so, what does it take to release the judgment attached to the property, since there are no proceeds to go to the sellers?
Thanks so much for taking the time to answer. We are very concerned as we have given notice and must move out within two weeks.
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Marta,
I have had this happen. Title company thought they did a full search but did not. Seller had 2 judgements and the only way out was for the seller to pay money to get them to go away. I wish you the best. Chances are this will probably not come to fruition. It all depends upon what the seller is willing to pay and what the holder of the judgement will take. If it has gone to a lawyer for collections it is even harder. They stand their ground because they get a cut of the money that they collect. It is no skin off their back at this point in the transaction to say no.
Thanks Carolyn!
I am sorry about your problems. In a short sale you can never assume it will close smoothly or even close at all for this and many other reasons. Sellers can even decide that their Bank's debt release language is unacceptable and decide not to proceed.
The solution to your current problem will vary from state to state. Consult with your escrow company and/or a real estate attorney for a possible solution. They will know what it will take to get clear title. In Arizona, we are often able to use the Homestead Exemption to address this types of problems if this is the seller's primary residence. Arizona statutes protect $150000 of equity in a home from creditors. Since there is no equity in the property it protects that too.
Thank you for your input
A seller in a short sale in most states does have the right up until the last moment to stop the sale. If there is a judgement against the house then that is a lien and it would probably not clear title anyway since the creditor wants to be paid, sometimes these can "pop up" late in the sales process and be missed by the listing agent and seller. The listing agent should contact the creditor and try to negotiate the debt. I had this happen with a credit card debt that in the 11th hour became a judgement against the property and we negotiated it out for 10 cents on the dollar, luckily for us it had only been for $5,000 though and both agents and the buyer paid off the debt since the sellers were destitute and the sale closed.
How long did the whole the process take, once the lien/judgment was discovered until it got negotiated, paid and the sale closed?
In our case we knew about the judgement from the Title work in the beginning, but did not try to negotiate it until we had an agreement on the short sale, excepting the judgement. Say it took probably a month. We had an attorney negotiating the short sale, because of the judgement.
Thanks.
Do not where you are located, however I have completed several of these transactions.
However, the solution is always the same; here is Arizona you can Homestead the home (market value has to be less than $150K), and the judgement cannot be an IRS or restitution order/judgement.
Homesteading in Arizona takes about 15 minutes and is a one page doc, simple and easy.
Good luck.
Wow, Arizona makes this easy. I bet CA is not as simple. Also market value of the subject property is well over 150K.
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