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Understanding Judgement Liens

When a homeowner owes a debt a lien is put on the homeowner's property in order to secure the debt. There are different types of liens like, mortgage and deeds of trust, tax liens as well as judgment liens. When a homeowner has unpaid bills such as credit card or utility bills a creditor can take the homeowner to court and get a judgment lien placed against their property. The judgment lien becomes legally attached to the homeowners property once the creditor records the judgment lien at the local lands record office.

Before a property can be sold any judgment lien attached to the property has to be paid off. The only way for a judgment lien to be removed from a property is for the lien to be paid in full or during foreclosure. When a property is sold through a foreclosure, the proceeds are used to pay off any outstanding debt which would include any judgment liens. When there is no sufficient money to pay all of the debts, the debts get paid in the order that they were recorded at the land records office, until the money runs out. Any debt that is not paid because there was not enough money from the foreclosure sale will get removed and will not be worth anything.

Since there is always the possibility that the foreclosure sale will not be adequate to cover the judgment lien, many lien holders are willing to sell their liens at a discount rather than loss the entire amount should the foreclosure sale not cover the lien.

Interest on Judgment Liens

Judgment liens have an interest rate assigned to them by the court. The lien accrues interest until it is paid off. Judgment liens can be very lucrative because if the judgment lien exists for an extended period the interest can wind up being more than the actual lien amount. If you are looking to make money quickly than judgment liens that are not tax related will work best. Some judgment liens might have to be renewed after a certain time period for them to stay attached to a property so check with your local lands record office for this data.

Where to Find Properties with Judgment Liens

A good way to locate properties that might have judgment liens is to find properties in foreclosure. More often than not, if a homeowner has not paid their mortgage they likely also have creditors that have not been paid. When you buy a judgment lien from a home in foreclosure you can collect the money soon after the foreclosure sale. If the home is not in foreclosure you will have to wait until the owner decides to sell their home before you collect money on the lien.