Short Sales and Judgment Liens
A judgment lien can be the kiss of death to a short sale. So, what is a judgment lien? When a creditor sues a debtor and wins, Georgia courts enter an order specifying the amount of money the debtor owes to the creditor. This order is a judgment and becomes a lien against all the debtor's property, both real and personal. The lien even attaches to any property the debtor may acquire after the date the judgment was entered.
If a creditor has been awarded a judgment against a homeowner who subsequently decides to short sell his home, the existence of the judgment lien may jeopardize the sale. If the judgment creditor is unwilling to release its lien unless the judgment is paid in full, the property cannot be sold.
However, the homeowner may have some leverage to persuade the judgment creditor to release its lien on the real estate. If the homeowner's lender forecloses, the judgment creditor will get nothing. This is so because the mortgage company's lien on the property is superior to the creditor's lien. Once the foreclosure sale takes place, all inferior liens on the property are wiped out.
Because a short sale involves the sale of the home for less than what is owed on it, it really makes no sense for a judgment creditor to refuse to release it's lien on the home. After all, nothing from nothing is nothing.
Having said that, there's no guarantee that a judgment creditor will agree to release its lien in order to facilitate the short sale of the home. If you are a homeowner in this situation, you should:
If a creditor has been awarded a judgment against a homeowner who subsequently decides to short sell his home, the existence of the judgment lien may jeopardize the sale. If the judgment creditor is unwilling to release its lien unless the judgment is paid in full, the property cannot be sold.
However, the homeowner may have some leverage to persuade the judgment creditor to release its lien on the real estate. If the homeowner's lender forecloses, the judgment creditor will get nothing. This is so because the mortgage company's lien on the property is superior to the creditor's lien. Once the foreclosure sale takes place, all inferior liens on the property are wiped out.
Because a short sale involves the sale of the home for less than what is owed on it, it really makes no sense for a judgment creditor to refuse to release it's lien on the home. After all, nothing from nothing is nothing.
Having said that, there's no guarantee that a judgment creditor will agree to release its lien in order to facilitate the short sale of the home. If you are a homeowner in this situation, you should:
- Tell your real estate agent about the lien before listing the property for sale;
- Contact the judgment creditor to begin negotiating for a partial release of the lien; and
- Be prepared to sign a promissory note if requested to do so by the judgment creditor in exchange for the partial lien release.
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