Big State Home Buyers works hard to educate people about liens, and we’ve offered plenty of advice on how to best deal with them. But now we’ve compiled a comprehensive list of every existing type of lien that we know, and we’re unpacking how they might relate to the sale of your home, and tips for negotiating the lien down with your creditor.
There are many different types of liens, but let’s begin with what are called judgement liens, or liens that are put on your house as the result of a suit judgement in a court of law. In this case, the plaintiff who wins a monetary judgment is termed a “judgment creditor”, while the defendant is known as a “judgment debtor.” Since these liens are the subject of a judicial decision, they’re not subject to negotiation. They could be the result of any suit: negligence, malpractice, or any other civil claim. A judgement lien will remain attached to a house in Texas for ten years. These are actually the only types of liens which can be absolved through filing Chapter 7 bankruptcy; statutory liens can’t be avoided in bankruptcy.
The next type of lien is called a statutory lien. This means it’s a lien created automatically by way of statute, meaning a lawsuit or judicial decision is not necessary for the lien to be placed. These include:
Child support liens
These are liens placed on an individual who is delinquent on his child support payments. The lien remains on the debtor’s house until he pays the amount due, or sells the house, or is forced into a lien sale by the recipient. The fortunate thing about these types of liens is that If they are placed on a house, they can be negotiated down relatively easily and they can also be temporarily lifted to permit the sale of the house.
Property Tax Lien
These liens often take priority over all other liens on your property, even ones placed before. If you cannot pay your taxes, the government may even force a sale of your property to pay the property taxes. This is why, in the event that you don’t pay your property taxes, your lender will often pay the taxes and add the sum to what you owe on your mortgage. That way the creditor can keep their first lien position to ensure that they are repaid in the case of a sale. These are essentially impossible to negotiate down, especially if they are county taxes in Texas. The county never negotiates.
The IRS is not easy to negotiate with, but they will negotiate. For instance, we at Big State had a case where our client told us she owed the U.S government two million dollars, and she was selling her house to us for $100,000. 2 million dollars! It turns out her husband had committed Medicaid fraud, and he fled the country to Bermuda, and he was a wanted criminal. The wife stayed back, so she wasn’t found guilty. But now she had a 2 million dollar debt against a $100,000 house. So what we did was, we made an offer to the feds: if they’d be willing to do a partial release of lien on the house, we would give them all the proceeds of the sale. Now, our client wasn’t thrilled to be receiving nothing for the house, but at least she escaped any further debt. So the lesson here is, if the lien exceeds the value of the home or the sales price, then you negotiate to make a partial payment. Because why wouldn’t a creditor take something rather than nothing?
Homeowner’s Associations have the right to collect fees from residents in their communities. If residents fail to pay these fees, HOA’s have the right to place a lien on the resident’s home, and they can even have your home foreclosed over only a few thousand dollars. The HOA doesn’t like to negotiate, but they will if they have to, allowing a creditor to possibly get a reduction or a partial release of lien in order to sell their home.
Anyone contracted to make repairs on your house can place a lien on it if you do not pay them. You absolutely should pay them all that they’re owed, but in many circumstances these can be negotiated down.
Weed cutting liens
Placed by the city or county of residence in the event of vacant or unattended houses which become a nuisance, these you just have to pay as well.
These are liens given to warehouses and other storage facilities on property stored at the premises to secure unpaid storage fees.
The right of the seller of a house to take it back from the buyer in the event that they don’t pay the full amount. Sometimes used in the application of purchase-money mortgages; a note secured by a mortgage given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate. This is an alternative way to finance one’s home for those who can’t qualify for a large enough bank loan. Instead of relying entirely on the bank, some people choose to borrow directly from the seller of the house, usually a financial institution. These are difficult to negotiate.
Medicaid can apply everything from hospital bills to nursing home charges against your home, meaning that if your loved one passes away they’ll apply a Medicaid lien against the estate. When the heirs sell the house, Medicaid will need to be paid something. They do negotiate though, and we at Big State negotiate with them all the time.
Home equity loans
In this case, you need to appeal to the creditor’s bottom line. You see, only the senior mortgage holder has first lien. So if someone has two mortgages, or a mortgage and a home equity loan, the second loan is the junior lien holder. So if they don’t lift the lien, the house is going to go into foreclosure by the first lien holder, and the second lien will get wiped out. That means it is simply in the creditor’s best interest to negotiate on their liens if it’s delinquent. You need someone who is good at negotiating to present an organized case with your HUD statement and all your other liens. For instance, let’s say you have a $44,000 mortgage loan on your property, and a $64,000 judgement against placed against your home. We would tell the creditor with the $44,000 mortgage, “Your mortgage is a junior lien to the $64,000 judgement. So why wouldn’t you negotiate a settlement in this case, to recoup some of your losses?” We make the creditor see that it is in their best interest. This technique requires someone who can intelligently speak to the creditor, because creditors are not the friendliest people to deal with. They’re bullies. You need someone like Big State on your team to haggle them down.
Not Something You Can Do Alone
Even though we’ve made a pretty comprehensive list of the liens you may encounter, there are many other types of liens that may affect the sale of your home. The one thing we counsel is that you don’t try to negotiate on your own behalf, as many creditors will simply deny you outright. Also, even if you do manage to gain their sympathy, it really helps to have someone on your side who knows about the art of leverage and negotiation. If a lender knows that you’re desperate, they will be more unforgiving, not less. But if the person they negotiate has experience and appeals to their bottom line, you may be able to make a much more forgiving agreement.