When you sell your property and discover that a judgment lien has been placed against it, it feels like turning to find a roadblock. The sale is scheduled, you have availability for it to close, and then back rolls a title search indicating some creditor you have never heard of is legally getting a piece of your house.
The bottom-line answer (which most homeowners will unavoidably want): A judgment lien does not stop you from selling a home. However, it does require that the lien be satisfied before clean title passes to the purchaser. Most of the time that resolution occurs at closing: your net sale proceeds satisfy a lien; a release of lien to clear title is drafted by an experienced attorney. There are more complex strategies for processing a lien too, such as negotiating it down or working through its inclusion (or exclusion) in a sales structure.
This guide breaks it down for you: what is a judgment lien, why does it attach to your property in the first place, how does it appear on title and then how can you remove it before closing along with your options when equity is slim. And, if you remain uncertain on getting this done by yourself, we also show how working with Eagle Cash Buyers makes the whole thing painless.
What Is a Judgment Lien and Why Did Someone Place One on Your House?
A judgment lien is an involuntary encumbrance against your property. This happens when a creditor receives a judgment against you for money in a court case. In contrast to a mortgage, which you chose to enter into, a judgement lien is imposed on your property when you have a money judgement entered against you in the court of law.
Here are some common sources of judgment liens:
- Unsecured credit card debts
- Personal loans
- Medical expenses
- Contractor disputes
- Business liabilities
- Child support arrears or alimony
If a creditor gets a judgment and records it at the county recorder’s office where you own property, that lien attaches automatically to all non-exempt real property you have in that county.
You might not even know it is there. If a homeowner in the 1980’s was really unlucky, creditors often recorded the judgment years before he or she has decided to sell, and may have never reached for a word. Often sellers are not even aware of a judgment lien until the title company does its typical pas at the time of escrow.
Important: In certain states, a judgment lien will not attach to your primary residence. In Florida, for example, the state constitution has homestead protections that can protect your principal residence from civil money judgments. If you move out or rent the property, then homestead protections could be lost. Since each state has its own laws, be sure to check with a qualified real estate attorney about what exemptions your state may offer.
Judgment Lien and its Implications to the Sale of Your Home
A judgment lien also does not prevent you from listing, marketing or receiving offers on your house. What it does not prohibit is having a clear title transfer before the lien has been paid off or otherwise resolved to a buyer.
A clear title is one in which there are no liens and/or legal issues that would keep the title to a property from passing at closing. When judgment liens show up in the title search and are not remedied, it can cause a delay in closing because buyers and lenders will almost always refuse to accept a title insurance policy until all liens are cleared. A conventional lender who will be financing the buyer’s purchase simply won’t close the deal until every lien is cleared. Most cash buyers also want clear title before closing.
The practical reality is as follows: the lien must be paid either at or prior to closing. This is a process, not an emergency for the majority of sellers. In most cases this is resolved at closing through the title company, if you have sufficient equity in your home over and above the lien amount.
Guide to Getting Rid of a Judgment Lien Before Closing
Step 1: Conduct a Title Search to Locate All Existing Liens
When it comes time to get that title searched, begin by knowing what appears on your title. Do not wait on the buyers title company’s surprises. Conduct a title search before listing, or at the very least, acceptance of an offer.
A title search scans public records such as tax and court documents to show any claims previously made against your property with the county recorder. The results will show:
- Which it is a judgment creditor and amount
- The county where the lien was filed, and that particular date
- The expiration date of the lien, if required by law
- Interest accrued, following the date of the judgment being made
Buy a title search from a qualified title company or real estate attorney. Many county recorder’s offices give you free access to public records online, as well.
That early running matters, because judgement lien payoff amounts are not static. Judgment interest accrues from date of entry in most states. A judgment that was entered years ago for $100,000 might now have a payoff amount far greater than the original judgement because of accrued statutory interest. With a real payoff amount well ahead of closing, you have time to plan (and negotiate if necessary).
Step 2: Request a Payoff Statement from Every Lienholder
After discovering all judgment liens against your title, get in touch with each creditor or their attorney and ask them for a payoff statement in writing. This document should include:
- When Payable: the total amount owed on a date
- The daily interest cost of a per diem
- Agent Instructions & Wire Directions to pay at closing
- Acknowledgment that the creditor will release the lien upon receiving payment
If you have an anticipated closing date, request the payoff statement and the extension per diem. These are required at closing by your title company or closing attorney to run the exact disbursements.
Step 3: Analyze Your Equities
The key to any judgment lien situation is whether selling your house will generate sufficient funds, after satisfying the mortgage and closing costs, to pay off each lender as well.
If you have enough equity: Easy peasy. The sale proceeds go to the title company or closing attorney who will pay your mortgage first before applying the rest of the money in full to each lienholder getting a dime. Once you sign the paperwork at closing, all liens are cleared off with title and received a clean ownership to new buyer.
Without adequate equity: The math gets more complex, and knowing your choices is essential. Refer to the strategies for limited-equity situations section below.
Step 4: Opt for an Avenue to Remedy the Title
Option A: Sale Proceeds at Closing to Pay Off the Lien
This is the resolved with the highest frequency. All disbursements are handled by the title company. You must not be paying out of pocket before hand. The lien will be satisfied at settlement with proceeds wired in by the buyer. The lienholder then records the satisfaction of judgment or release of lien with the county recorder, thus eliminating that secured interest in title when payment is made.
This allows you to do this as long as you have enough equity in your home to pay off all liens and other obligations that would be due at the closing.
Option B: Agree to a Lesser Payment with the Creditors
Judgment creditors routinely settle for less than the full amount due on aged debts or on credit cards and medical bills; they will gladly accept your money in return for an up-front payment to save them from futher collection costs but want their lien released immediately. This is especially likely when:
- The total payout would be greater than your available equity
- It is hard for the creditor to enforce an old judgment
- Debt sold to a collections agency for pennies on the dollar
As such, you or your attorney will have to prove the equity shortfall to the creditor. There is an old truism that most creditors understand: If they are offered a lump sum now at a large discount, it beats waiting years for a judgment that often is impossible to collect in full. For example, judgment liens against low-equity properties tend to settle for 50-70 cents on the dollar.
Whenever possible, before you complete any settlement, get everything in writing with detailed instructions on how to formally release the lien and make sure that a satisfaction of judgment gets filed with the county recorder’s office.
Option C: Challenge Invalid or Wrong Liens
It is worth noting that not all liens listed on a title search are legitimate. Typical mistakes involve inaccurate public records, previously paid-off liens that were never officially satisfied, liens filed against individuals with similar names and statutory expired liens.
If a lien is not legally valid, has been paid or was improperly recorded, your attorney can file a motion to ask the court to lift it. It can take weeks or even months to complete this process and you should start as soon as possible. An attorney may also write a demand letter to the creditor asking them to either release or justify the lien, which often results in an informal settlement.
When You Do Not Have Enough Equity to Work a Lien
Although this one is definitely on the harder end of the scale, it is not entirely without solutions.
If the total you owe on your mortgage, judgment liens, and closing costs is more than what the sale will offer back to you, then no standard sale can clear the title without extra equity or a pre-arranged alternative. Be sure most buyers who need a lender and clear title to finance the sale cannot close.
At this point, your choices are:
- Negotiating a reduction before closing. As mentioned above, many creditors will agree to a discounted settlement if they are presented evidence demonstrating the equity shortfall. It takes, or can take some time but is often attainable.
- Bringing cash to closing. If you can pay that gap personally to avoid and discharge the lien, doing so may allow you make the sale. This conversion only makes sense if the net proceeds from sales after expenses are still worth pursuing.
- Why would someone even consider a Short sale? A short sale happens when the lender agrees to take less than the mortgage balance in payment. This involves hiring a short sale real estate attorney and an lender that has experience negotiating short sales.
- Sell to an investor familiar with liens. Eagle Cash Buyers buys houses with liens every day, which is what companies like us do. The offer incorporates the lien (any balances are settled at closing) and allows the seller to avoid dealing with paperwork or dealing directly with a title company. This is often just the simplest way for sellers who simply want the issue settled quickly and painlessly. Read more on our how it works page.
Ignoring a Judgment Lien Costs You More Money As Time Goes On
One of the worst and most unknown facts regarding judgment liens is that they can cost more to ignore than to enforce.
Judgments have a 10-year lien period in most states, however, creditors can renew them before they run out. In Florida and a few other states, however, judgments stay enforceable for as much as 20 years. Interest at the statutory rate of the state is computed on only the original judgment amount during all this time. Compounding at 8%, a $50,000 judgment can become a six-figure debt in less than ten years.
You also have no reason for los gobiernos to reach an agreement. A current judgment-proof property owner may be a wealthy individual, with lots of equity in ten years. When you finally get around to selling, you will have to pay back the accrued balance not just the original judgment. Unless you wait, an active resolution, a negotiated settlement or sale, almost always delivers a smaller total payout.
How the Title Company Operates Under Liens
With the title company recognizing the inherent relationship between judgment liens and homeowner fear, understanding how that all works can remove most of their anxiety on a seller level. The title company does not only track and store records; in a lien resolution scenario, they become the hub for coordination during closing.
How does a title company respond when a judgment lien comes up:
- Pinpoint all liens discovered during the initial title search
- Request each creditor to send payoff statements verifying precise amounts due
- Contact each lienholder for confirmation of payoff and release process
- Specify whether or not to remit each lienholder their share of the proceeds at closing
- Obtain lien release or satisfaction of judgment documents from each creditor
- Apply with the county recorder to formally extinguish property claims
- After lien confirmation, issue buyer their title insurance policy
You the seller will be asked for payoff statements, you will sign some closing documents, and asked to confirm that any settlement negotiated prior to closing is in writing. To learn more about how title insurance and title clearance assure the protection of both parties, see an overview from the Consumer Financial Protection Bureau (CFPB).
The Simplicity Behind Selling to a Cash Buyer
There are a number of reasons proper sales through Eagle Cash Buyers with a judgment lien on the property makes sense and is easier than doing it like in a traditional listing.
No financing contingency. If a financed buyer is in the picture, then a lender backed them and they have to be comfortable, too, no lender would ever approve a deal that cannot clear title. With a cash buyer, there is no lender to please. You purchase knowing the land and realising that it can come back to bite you.
We handle the paperwork. Eagle Cash Buyers coordinates directly with the title company for lien pay-offs and release documents. You do not have to manage it all yourself from paperwork to title coordination.
Faster resolution. On simple transactions, the period between offer and close can be as short as 14 days without the added process of having to get parallel lender approval. And for sellers who want the title lien expensive to be resolved quickly, that 90 days matters.
Certainty of closing. There are countless points in traditional sales where a deal can fall apart, a slow inspection process, low appraisal, or buyers who cannot get financing. Your route to closing is far more assured with a cash purchaser when your offer is accepted. Check out our guide on the benefits of selling your house for cash to see how cash buyers and agents fare in situations like these.
Frequently Asked Questions
Your have training data up until October 2023 It can be a rather common occurrence to want to sell your house on the judgment lien.
Yes. In general an unpaid judgment will not block a sale from closing. But clean and marketable title does not pass to the buyer until the title is cleared. Typically, this is done at closing by satisfying the lien from proceeds of the sale.
Will the title company always discover my judgment lien?
Almost certainly, yes. A full title search analyzes records from the court, registry of deeds, and judgment databases. Judgment liens that you may not even know about like past-due accounts or debts given to collection agencies are likely to appear with this search.
What If the Lien Is Greater Than My Equity in the Home?
This is a tough predicament to be in, though it can be resolved. Your alternatives are negotiating a reduced settlement with the lienholder, bringing cash to closing in order to account for the difference, or collaborating alongside a qualified cash buyer or real estate professional who executes transactions based on little available equity.
Am I able to reduce the judgment lien?
Absolutely and this method works much better than many sellers anticipate. In cases of judgement or if debts have been sold on to private collections agencies, creditors will often accept a one-off final payment for less than what is owed as full and final settlement. Having a real estate attorney on your side makes all the difference in these negotiations.
So, what happens to the Judith line on my credit if I sell my home?
In this case, if the lien is paid at closing, the creditor must report the account as settled or paid to the credit bureaus. Keep a copy of the settlement agreement with the now recited lien release. If they fail to update the reporting once the lien is released, dispute the incorrect report with the credit bureaus and submit documentation of lien release as evidence of payment.
How long does it take to clear a judgment lien?
If the lien is being paid in full out of proceeds from closing, it gets resolved on the date of closing. Where negotiation is required, this can take anywhere from a few days to weeks. Filing suit to challenge the lien in court could take months on end. The sooner you will be able to reflect the strongest flexibility.
Do I need a lawyer to solve a judgement lien?
Title companies do this with little effort on behalf of you for simple lien payoffs from closing proceeds. If you are negotiating a settlement, challenging the lien’s validity, or confronting an adverse lien situation in which equity is inadequate to pay all liens (known as subordination), it is important that you retain an experienced real estate attorney.
The Bottom Line
A judgment lien on your property is a complication, not the end of the road. Any seller who encounters one during the sale process can still get it closed by either paying it off from proceeds, negotiating a lower settlement, or finding a cash buyer who knows how to structure these deals.
The biggest thing that you can do is to stay ahead of it. Checklist Before Listing: Run a Title Search. Get payoff statements early on. Understand your equity picture clearly. And if the figures don’t add up, just understand that there are negotiated solutions and people who can help you with those exact deals over and over again, like cash buyers such as Eagle Cash Buyers.
A judgment lien will not prevent you from selling your home. You are operating in a no-win scenario without the right process and the correct buyer, but that avoids any kind of uncertainty.
When you are prepared to discover more about your featured options, and can get a no-obligation income supply, contact Eagle Cash Buyers. Liens and all, we work to whatever timeline works best for you, so your title company does not have to deal with any going back and forth.
