I thought I'd initiate a session to vent about the handling of judgment liens in a short sale process. There really is no good way to handle these liens. You need to wait until you know the property is going to close, otherwise why pay them. But, when you wait, you lose your leverage, and you end up paying more than necessary. And, after slamming HAFA for soooooo long, I gotta say, there was no way my closing was happening today, without the buyer getting the $3,000 incentive at closing. Slam the lien on the property, let it sit there, and then it's practically impossible to track down the lien holder and get a payoff, when the party on the judgment has sold the lien to someone. Sigh.....
explain judgment liens. Are these liens against the property by third parties? These should be included on HUD for sellers lender to pay, and what isn't should be passed on to the buyer. Early disclosure is a must.
Michael - Agree on paying prior to closing in most cases, but negotiating early is always helpful. I would suggest initiating a conversation either when you get the listing or when it goes under contract, depending on the situation. Some sellers are already in talks with the creditor before their property is listed.
@Wendy Overall, I agree that earlier is generally better. I find that there are two type of judgment liens that are the most annoying. (1) Old ones that have been sold since the judgment, but not old enough to expire and (2) Nuisance liens slapped on just before closing.
And, ooops, I just mistype re HAFA, I mean "without the seller getting the $3,000 incentive". So, now I can't be so mean spirited about HAFA, at least for a few weeks.
Just closed a deal last November with a Judgement lien on one of the sellers from a credit card company. Caught it early on the prelim and was able to negotiate with the company for a fraction of the lien for its release. Disclosed on HUD1 and deal went forward. Garbage liens are becoming a nuisance and popping up at last minute for some of my deals. I always ask sellers now if they are current on there Garbage bill as the city collects this and is quick to place a nusuiance lien on the property for $290.00 that can kill a deal if time runs out on approvals because it takes them two weeks to get you a payoff for it.
We have dealt with many of these before. Most of them are handled by attorneys who understand that if one lienholder doesn't agree, everybody loses. I am working on one right now that has 7 judgment liens that total over $600k. Never say never and never give up - we already have 3 out of the way for -0-. It does cause a big problem for HAFA and this one had to go traditional.
Often the collectors will be quite reasonable. I've had a hospital release for $0. I think that was my only case of a $0 release. The para-legal responded: But, where do I send the money? Just couldn't fathom that this was a freebie.
My most annoying was probably the State Public Assistance lien for $60,000, placed on the $87,500 property belonging to two disabled clients, five days before closing. A Public Assistance Lien, now there is an oxymoron. They demanded that the agents give 1% of the commission to them. We considered it, but declined their kind offer.
Garbage lien! Isn't that the truth.
Investor policies vary widely on what is allowable, in my experience. FHA will allow basically anyone to pay, and will consider a variance, if the net is high enough. By contrast, I've had deals where no payment was allowed from anyone. Clear them, or don't close.