Short Sales and Judgment Liens - Part Two

I recently had a short sale fall through because of a judgment lien. A little history first. When the property first went under contract, I had the closing attorney run a title search and it revealed 3 judgment liens and an HOA lien. I immediately contacted my sellers and instructed them on what they needed to do regarding the liens.

Being such amazing clients, my sellers got right on task, making contact with the judgment creditors and arranging for the liens to be released so that the short sale of their property could proceed.

Well, eight months later, we finally get the approval of the short sale from the lender and request an updated title search from the closing attorney. Surprise, surprise. One of the judgment liens had not been released. When my clients contacted the attorney for the judgment creditor, they were given the run around. Calls were not returned. They were placed on hold and the person they need to speak with never came on the line. This went on for a week or two.

Finally, I initiated a three way call with Mr. Seller and a representative of the attorney for the judgment creditor. My client had been told at the beginning of 2012 that if he entered into a payment plan, the lien would be released. We learned during the three way call that this was not true. We were told that my client would have to make a substantial payment toward the almost $3600 owed on the judgment before the lien would be released.

Well, the problem with this is that my clients were trying to short sale their home. They didn't have $3600 to pay down the lien. Besides, if they had $3600 they would have been trying to save their house! Despite the fact the the property is scheduled to be foreclosed on the first Tuesday in October, the attorney for the judgment creditor continued to play hardball, insisting my clients paying money they simply did not have. The result. . .the contract expired and the deal is dead.

What's so frustrating about this situation is that had the attorney for the judgment creditor agreed to release the lien, the judgment creditor would have been in the exact same position as it will be when the property forecloses. The judgment creditor will still have a valid and enforceable judgment against Mr. Seller and will still have the right to garnish his wages, levy on property, and pursue all other legal collection efforts.

So, the moral of this story is to get it in writing. When the attorney for a judgment creditor agrees to release a lien if the homeowner will enter into a payment plan, make them put it in writing. So, that if months later they renege, you have something to wave in their faces.