Short Sale with a Judgement in 3rd position
hi all!
I have a sale that has a 1st w/BofA at 460,000, a 2nd that WAS BofA and is now Nationstar (just last week in the middle of my negotiations) and now the prelim comes out and voila, there's a judgement against the wife for $25k. The judgement was due to a craft former employer who happens to be an attny who claims his employee (the wife) stole 3k from him. The judgement is 25k due to "administration costs".
Now my question is how in the world do I convince either the 1st or 2nd or both to pay this? The person will NOT release it from the house in order to close it; BK wont get rid of it. Letting the bank take the house back appears to be only solution but neither seller nor I want that to happen. (Oh and sellers are in the process of a divorce too btw....). Husband and wife both on title, Husband ONLY one on both the loans. We are in California as well. House had 15 offers on it and we are in escrow at 580k.
I need some brains, as I think I fried mine on this one, to help me! Any great words of wisdom out there?
Replies to This Discussion
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Permalink Reply by Wayne Brooks on
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Probably not enough time, but I assume the judgement was a "default" type judgement, where the defendant didn't answer so the plaintiff automatically prevailed for whatever they asked for. If the wife could reopen, she could defend/win, or get a resonable amount for a "true" judgement. At least here in Fl, default judgements are routinely over turned.
Otherwise, dealing with an unreasonable lienor whose insisting on full payment can certainly be tough.
Looks like you need a buyer who can/will come up with an extra 4- 5% contribution.
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Permalink Reply by Gael Adair Grove, CDPE/SFR/ePro on
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hi,
Yes, I know I should have read the pre first; however the circumstances were such that the pre came after the offers unfortunately.
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Here's what we ended up doing. The HAFA appraisal was 80k lower than the sales price; buyer putting down 20% so we lowered the price to the HAFA appraissed price and the buyers are therefore in the position to pay the judgement at close. Our next dilemma is that the person to whom the judgement is owed is stating it's $35,000 and the court papers say $25000. So I presume our next step is the seller goes to the court and gets a statement that the title company can use for refuting the demand figures? Any feedback would be great!
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Permalink Reply by Simon Campbell on
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What the person holding the judgement says is irrelevant. If the lien or court judgement is stating $25,000 then the judgement is "only" $25,000. Any numbers thrown around by the plaintiff is just a shot in the dark to try to get more money from what they suspect is a guaranteed source of payment. What they don't realize is that if this deal fails and the house goes into foreclosure, the plaintiff gets nothing at all.
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Under the theory that scumbags shouldn't be rewarded for their actions, and if the circumstances of the judgement amount are true....it would probably be the same amount of time (one hearing) to get the original judgement thrown out, as to get some declaratory ruling on the actual amount of the judgement. With no judgement, the attorney is irrelevant to the short sale. May not be practical, just seems fair.
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I agree, BK would wipe out the judgement. It's not the same as having to satisfy a junior mortgage lien, in order to accomplish a short sale, after a BK. my assumptions were; 1) Homeowner doesn't want to go through the entire BK process to eliminate the one judgement. 2) If the $25K judgement was indeed the result of a Default (no answer) judgement, with no actual trial/hearing on the merits, and which was really based on a possible $3k issue, it might be easily overturned. Here in Fl it likely would be. Don't know about Ca., and I ain't no attorney.
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Permalink Reply by Kathy Fuhriman on
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The judgement will likely not get wiped out at foreclose sale as the reason for the judgement is personal with the lady and is not a true lien against the house. Just like fed tax liens they follow the person not the real estate.
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Permalink Reply by Shel-lee Davis on
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I had a similar situation to your original situation. Per your original scenario, only the 2nd TD is getting shorted. The 1st being paid in full. If that still holds under your revised scenario with the low appraisal, then you go to the 2nd (which is the only one who would suffer in a foreclosure, as the 1st would recover fully) and have them do the carve out to the judgement lien.
In my case, the Wells Fargo 1st was foreclosing (and would be paid in full in a foreclosure auction), the B of A 2nd was a HELOC and there was a $15,000 judgment lien. The judgment lien holder was not willing to negotiate at all due to bad blood with the homeowner. I presented to the 2nd that in foreclosure they get $0, and in this case they can get $XXX minus $15K. I had to escalate to get the approval, but I did get the approval. Believe it or not, when you get high enough in a bank, they will always take some money over no money. Good luck.
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In Arizona I have filed for homestead protection that will allow the transaction to be closed without the judgement being satisfied. This will not erase the judgement but will allow the sale to be completed. Check with your title company. This is a relatively easy procedure here and can be done in one day.
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Permalink Reply by Tony Morales on
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too much misinformation about wiping out the judgment with bankruptcy.I am not an attorney so I am making this disclaimer.
This information was told to me from an attorney. Bankruptcy only discharges the debt, not the lien, the lien is created after the recording of an Abstract of Judgment. A bankruptcy attorney needs to also file to have the lien stripped, (usually with Chapter 13). Doesn't necessarily mean it will get stripped. The judgment creditor can contest that action.
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Permalink Reply by Amber Shepherd on
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In escrow we see this situation all the time, as an Escrow officer. From previous transactions with similar issues I have seen the following take place. I am not advising that these will work but I have seen them handled this way in the past.
1) Real Estate agents Negotiate with the attorney for a lower amount to settle the judgment and release the lien
*** Ive also seen them negotiate an amount to pay now and get a partial release for the sale, but the seller would need to understand the lien would still be valid against them.
2) Have previously seen buyers pay these costs, or relators at the lower neg lien demand to close the file. YOu would just need to make sure the short sale lender and new buyer loan agrees that Buyer or Realtor can pay these fees.
3) if a lower amount is neg by the Realtor for the short sale lender, submit new est HUD to 1st & 2nd with that amount to be paid against the lien by BofA. Remember BofA is a servicing company for investors. So each case is different per investor Guidelines. So there is never any harm I would think in requesting it, they would just deny it if the investor choses not to pay it.
Im sure I can think of other cases that I have seen this situation, if you have any questions please contact me 408-226-3278. Also check with your Escrow Officer as well to see if these will work with thier underwriting guidlines at thier company. Again I am not advising you how to handle your transaction, for I am not a relator, but these are ways I have seen this handled in the past with other realtors.
Amber Shepherd
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I have also seen sellers ask the court for a order to avoid lien. Title and Escrow will except this type of order from the court.
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