What does it mean when a property has a 'judgment' on it?

Question

I just need some clarification, thanks!

Mark F. · Answer

It means the homeowner got sued and lost and now there's essentially a lien against their property (often called a "cloud" on title). If they sell or refinance, that lien has to be paid off for clear title to be issued.

Account Closed · Answer

@Tom S. @Stone Wilson

A lien doesnt need to be paid in order to purchase/sell a property. Im in the middle of a contract right now on a duplex with a property that has a $10k lien on it. It depends on how the property is being purchased.  A cash buyer can buy a property with a lien on it, the title is insurable, the insurance will simply state that the only outstanding item/excluded item is said lien. You can buy it  and simply continue to not pay it. It only is a problem when there is a bank involved who wants 1st lien position. So if your a cash buyer for example and your buying a rental property which has a lien on it and you intend to long term hold the property or even die with it (such as my case), then the lien really isnt an immediate problem. The lien holder needs to sue or attempt to foreclose on the property in order to get paid, at which point then you have to pay them. You need to be able to come up with the funds to pay them if they attempt to forclose, which as most of us see, is a decent chunk of time generally.

Another reason, almost all, lien holders are willing to accept pennies on the dollar is because in most cases they are not 1st lien position, the bank is. and if the bank/1st lien position ever forecloses on the property due to borrower nonpayment, then the lower lien positions are all wiped out... receiving only remains of the proceeds after the bank takes theirs, and unless there is substantial equity then unfortunately the lien holder receives  nothing.

the 2 liens that automatically get bumped up to 1st lien position: delinquent taxes, federal or property. (hence why most banks require escrow accounts on mortgages so they can make damn sure they keep their 1st lien position)

Brian P. · Answer

Tom

Gee, I didn't know you were most judgment holders. So I don't know who the heck all those people I bought discounted judgments from over the last 60 years were. They must have been very rare judgment holders. What my experience has taught me is that you are the rare judgment holder.

You have a guy with a judgment that hasn't gotten a dime from someone who shafted him for say 4 or more years, he is happy to get a couple of bucks and have someone who is going to hound his old enemy for the money. And most of the judgments I bought were in California and so good for 10 years and yes I did renew them.

And I don't know the state of the law at present but you could renew them more then once which I did a few times, It is just that most creditors don't bother but I did, I collected even if it was from their estate.  The average judgment holder finds out that over 80 percent of judgments never get collected and one guy in the recovery business said that is really closer to 95% in his area. Do you think the average creditor, especially small claims just doesn't throw it in a drawer and says to heck with it, I'm tired of of banging my head against the wall while the debtor has a good laugh and vows never to pay a dime, and when the debtor finds out that judgments can expire he plays the calender game, because very few get renewed.

Joel Owens · Answer

Specifically with judgments that state laws vary on what you can do and if the judgments are renewable etc.

For taking pennies on the dollar that is mostly true. It depends on WHO owns the judgment. If it is a large debt buyer company they could care less and buy for 10 cents in bulk and will usually settle for 40 or 50 cents on the dollar or less. You have to remember if the judgment is years old there is ongoing interest daily usually adding up. So 50% to them is many times over what they paid for it.

Now an individual judgment holder is different. They might hold a grudge and want to personally stick it to the person with the judgment.

If the judgment hasn't been recorded long depending in the state they might be able to file to reverse the judgment, get it vacated, etc.

The difference is if they can get it vacated then generally it is like it never happened and comes off the credit reports. If it is paid satisfied then it stays on usually seven years from the date of initial judgment entry. To attach to assets in addition to a judgment you usually have to file the FIFA to enforce.

The attachment to the property you will have to see if the judgment amount is small or large. When negotiating with the judgment holder they just have a lien interest on the property. They might agree to release the lien interest for a set amount but still come after the borrower for the difference. If they want it to be over with the judgment holder has to agree the amount will be considered paid and settled in full. That keeps them from keep coming after them later or selling the remaining balance of the judgment to another collector.

No legal advice given.

Tom S. · Answer

@Brian P.

I disagree that almost all judgment holders will sell in a minute for 50 cents or lower on the dollar.  I just recently attached a lien to someone's property and I wouldn't discount it a penny, because I know they have to pay me if they want to sell or refinance.  In addition, I'm getting 12% interest per year and I'll ask for that as well.  I can renew the judgment every 8 years, so it won't just go away either.

- Tom

Brian P. · Answer

Yes all the people above are correct. They just failed to mention one thing, is you find a judgment on a property you are looking at be sure to contact the judgment holder before they know the property may be sold and offer to buy it at discount. Almost all judgment holders will sell in a minute for 50 cents on the dollar. I go for 10 cents on the dollar or less.

Ned Carey · Answer

Sure, as already said the judgement gets paid from the proceeds of the sale.

EX a property has an $80k Mortgage. If you buy the property for $100K, the $80K  mortgage gets paid off and the owner get the remaining $20K.  If the owner also had a $15K judgement against him, the judgement would also get paid and the owner would only get The $5K that was left.

Curtis Bidwell · Answer

@Stone Wilson  the short answer is definitely "yes"!  And it gives you an excellent reason to discount the price, as many will be wary of such a cloud on title that they won't extend any offer.  Just relize the issue is his and not yours.  The  $ to pay it off come out of the sale proceeds.  Check with your closing agent to be sure the lien is paid off at closing (your title insurance will require it). Good luck!!

Rick H. · Answer

Actually, a person with a judgment has a general lien which attaches to any and all property that they have an interest in their name as record owner, by way of an Abstract of Judgment ("AJ") that has been recorded in that county by the creditor.

Stone Wilson · Answer

@Mark F. Can I offer to buy someones house if they have a judgment on it?

What does it mean when a property has a 'judgment' on it?

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