How to Eliminate a Judgement on a house

Question

Hello BP,

I have a property in Houston that I have under contract for $8,000 and its on escrow. Title company mentioned there is a judgement on it for $9,5000.

So I am just wondering if there are some recommendations on How do I negotiate or eliminate the judgement?

The judgement on the house dated back in 2011, The owner past away last year, and her daughter is selling the house. the original judment was for $5,000 but has been acruing interest over the years.

Title company gave me the record of the judgement, but it does not say what its about.

I appreciate your help

Rick H. · Answer

@Bryan Scott - good try, but I'm not buying your logic.

A judgment, once perfected, is now a secured creditor. The judgment is then attached to the decedent's assets and in this case, apparently real property is the primary asset in the estate.

I don't know TX probate laws (of which many are uncommon) however it may be difficult for the property to be sold without the PR satisfying the judgment.  This could work to your benefit or not, depending on how play your cards.

There are three positions here:  1) Asset, 2) Creditor and 3) Equity of heirs. Most important is to remember what hat you are wearing at any given time!

If you negotiate to buy the judgment, if they believe that probate is open they may be more likely to believe they will be paid off, perhaps in full.  If you offer to buy the debt don't tip them off that the probate has been opened, although they may already know.  You're interested in buying judgments and they just happen to own one.

Another strategy is, if possible to close the estimate without paying the AJ, buy subject to the judgment, let it ripen and (hopefully) the creditor will forget about it and will eventually forget to re-record to keep it active.  Risky.

Really, this is no different than any other deal except that the seller is an estate.  You've contracted to buy for X, there's a secured creditor (lien) for Y, and it's equal to or more than the contract price.  Just like a short sale.

If you really like the deal, buy it and don't get too distracted by the opportunity to make another $5-7K by negotiating with lien creditor.  Btw, they might be willing to accept some equity stretcher in lieu of cash for the judgment. Whatcha got in your garage that you don't use?

Account Closed · Answer

I would be very surprised if a debt that originated in 1979 could legally support a judgment issued in 2011. The statute of limitations probably expired about 30 years ago, but that likely would have been an argument for the debtor to raise before the judgment was entered against him. Since the judgment was entered, tough to contest now.

As Joel says, no way to say without more facts, but since you made an agreement to resolve it for $2,000, this is really a moot point.

Maurice George · Answer

Hector, in some states, once you obtain a judgement, you can renew it every few years (my state is five years). So, if they renew it every five years, their judgement is still valid.

Hector Perez · Answer

Account Closed

thank you for the feedback. Just a  questions following up your comments

1) when I negotiate down the price, should I pay the judgement off before closing or I can it wait at closing of the house and title will transfer the funds?

Account Closed · Answer

@Joe Gore it depends on facts we don't know, such as whether there is a mortgage on the property, etc. If there is no mortgage, then the judgment holder stands to get the net proceeds from the $8,000 purchase price, so they wouldn't be all that short. Worst case, you are out of pocket an additional $1,500 to cover the balance of the judgment. But Hector is their best chance to get paid something after three years of sitting on their judgment. I bet they'll negotiate.

@Hector Perez You can do it either way, what you need is an advance agreement to resolve the lien and signed release of lien from them at closing for your title insurance/lender. Payments to resolve liens are frequently HUD line items.

Keep in mind that this is not legal advice, as I have no idea what TX law is and am not your attorney, just things to think about.

Account Closed · Answer

Call up the judgment holder and tell him/her/it that you'll give them $x.xx (perhaps $1,000) to release the judgment. Tell him that the judgment debtor is dead, the most you can pay him is $1,000 given the condition of the house, and this is the only way they'll get paid. Keep in mind that the "real" amount of the judgment, i.e. the damages, is $5,000, so negotiate off of that, not the full amount plus interest. There's no magic to it. Probably no good way to eliminate the judgment through the legal process, given the amounts at stake and the time that has passed. You're likely going to have to pay the plaintiff off.

Hector Perez · Answer

Once again thanks for the suggestions and feedback.

it really helped me solve the problem and now we are closing tomorrow.

I still would like to know more of details what happened with the judgement and how old it really was. The creditor says it was from 1979, but I will leave it alone.

We are wholesaling this baby, after 3 months of fixing title issues and getting all the problems out of the way.

Thanks again BP for your awesome feedback

John Rooster · Answer

My guess would be that he got the credit card in 1979, but did not default till 2010ish. I very much doubt he defaulted in 1979

Bill Gulley · Answer

Yep, me too, especially since the debtor probably abandoned their interest by failing to seek collections over the years.

$2K is good, be happy, don't worry! :)

Joel Owens · Answer

Hector if that's the case from 1979 credit laws have changed a ton from now to then.

Some states you can keep renewing the judgment. It really varies by state across the board.

The key is you said the judgment was entered in 2011. That wouldn't make sense to me. Maybe you are not getting the full picture of the information.

For a credit account for example that defaults internal collection ensues then quickly if no payment usually they close the account and discharge the debt off the books and sell to an asset purchasing company. To the asset purchasing company it's all about the numbers and collecting over time.

Now generally you can report to the credit bureau for seven years and are not allowed to re-age an account to keep reporting. After seven years you can still try to collect but cannot put on credit anymore. After so many years the statute of limitations runs out where you cannot pursue a judgment on the debt or garnishment etc. At that point the collector can keep pursuing you but really can't get  a judgment or affect credit so they are ready to settle for pennies.

You only have so much time by statute limitations to pursue a judgment. Are you sure this account wasn't opened in 1979 and then closed in the 2000's? Maybe it's because they debt was so old they were allowed by the old laws to still file a judgment and the statute of limitation laws did not apply because of grandfathering. It's really impossible to know without all the information. The main point is you are getting the property for XX and selling for a profit of YY. The other stuff is really immaterial to everything unless you just want to understand it for fun.

The executor of the estate has to settle the assets and liabilities with the judgment being one of them.

No legal advice.

How to Eliminate a Judgement on a house

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