Liens Follow The Property?
On a property I'm currently working on shorting, there are two liens attached to the property that were the result of lawsuits and subsequent judgements found against the current owner.
The owner will not receive any proceeds from the deal, so there will be nothing paid to these lien holders. Do I need to worry about these types of liens following the property itself after the sale, rather than the owner?
How do you propose to acquire clear title if the liens aren't paid? The answer? You won't.
Better to address the liens, now, then get a rude awakening at closing....
How does one deal with these sorts of liens in this kind of situation?
Essentially, you replicate the ss proposal for the lienholders' consideration, and your Proposal will include a settlement offer.
I just worked on a short that had a $90,000 hospital lien.... they agreed to release the lien for $35,000.
There are all types of liens that you'll encounter.... and all must be addressed
(usually outside the scope of the HUD1) before you can close.
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Only way a buyer might acquire OK title without all those liens is to buy the RE at foreclosure sale...then all inferior, secondary liens are wiped out.
The debts still exist against the debtor, but the liens are gone when the 1st forecloses its lien.
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Thanks to all for the responses. I feel like I may have jumped into my first deal before really understanding all the things to watch out for / that could go wrong -- but I knew that if I waited until I was an expert before I tried to do my first deal, I'd never get anywhere.
So if I'm understanding correctly, I should submit an offer to each of the other lien holders for a discounted payoff. Two questions:
1) What would you recommend I offer the non-security deed lien holders? Here are the details:
FMV: $218K
total of security deeds: $200K
Lien #1 (lawsuit judgement): $14K
Lien #2 (lawsuit judgement): $2K
2) What does an offer against these type of liens generally include? Obviously an offer letter. Would it also include things like P&S, hardship letter (these creditors probably don't care -- they sued the owner and won, after all), tax returns, etc?
Dear chrisdillon,
In this type of transaction I normally do not pay more than 20% of face value on judgement liens.
I have been successful in the short sale process of liens, but have had a greater deal by out right buying the judgement liens for cents on the dollar. Saves me time and paperwork by just purchasing the bad debts.
If you do it as a short sale I recommend you submit any and all information that would favor the discount.
You ought to read as much as you can about the mechanics of preforeclosure short sale acquisition.. and certainly learn to prequalify the short sale candidate before spending too much time on it's acquisition.
The Proposal to junior lienholders should be more like an executive summary, supported with whatever compelling data you have...
I'd include the estimated HUD1 that indicates the Seller to receive zero proceeds...
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