Property Sale with Potential Judgement for Unpaid Debt

[dlatin 328]

I have a contract to buy a property that is known to have a judgement filed with the county for an unpaid debt related to a truck purchase .  The title company sent over a copy of the judgement dating back to 2007.  The title company asked me to ask the seller’s lawyer if the judgement is attached to the homestead.  If not, a letter from the lawyer will work, if yes, they’ll need the payoff statement.

The seller is an older Hispanic couple that doesn’t speak English well so I’ve been working with their young daughter (maybe 20 years old) through the process.  I was told the lawyer they have been working with has not been much help and this has been going on for a while.  My understanding is this debt has been sold to a collector, the company listed on the judgement is Collins Asset Group out of Austin.  I’m hoping to get this closed quickly so I can work on the property over the holidays.  Best case scenario I think is this judgement is NOT attached to the homestead and we can close on the property without settling this judgement.  If it is attached, I assume I could maybe reach out to the collector?  As I mentioned, the judgement was filed 14 years ago.  Does anyone have any experience with something like this?  I was hoping the title company would track this down but it looks like more legwork needs to be done on our part.

[Apep 645]

Pics aren’t showing up. 

[TwiceHorn 31440]

Your guess is correct, most likely. Judgments/liens in Texas mostly do not attach to homesteads. Exceptions are mortgages and tax/government liens. 

You may need to hire a lawyer for the sellers basically or pay a bill. 

The judgment is also probably dormant and now uncollectable, but that gets a little factual. 

I am with you, this would seem to be prime title company expertise, but I guess they can't rely on their own evaluations for stuff like this. 

 

Edited November 18, 2021 by TwiceHorn

[Updawg 2266]

Do title companies do anything other than collect money and have a ton of paperwork at closing?

[Kennythetiger 9376]

Yeah, they find shit like this. 

[deadshank 24652]

13 minutes ago, Updawg said:

Do title companies do anything other than collect money and have a ton of paperwork at closing?

Well….they make lots of money and charge outrageous courier fees for sending things over to the office next door.  

[ROFL BOX 6647]

I'm noticing the part where you glossed over the gentrification & how you're throwing some old Hispanic couple out of their only home.

[dlatin 328]

I'm noticing the part where you glossed over the gentrification & how you're throwing some old Hispanic couple out of their only home.

Actually, we’ve been neighbors for 17 years and they abandoned this house 2 years ago and are living in a nearby town. I’ve offered to buy the house and help clear the lien and pay back taxes so they can have access to capital tied up in the property…as well as fix up a property that has a ton of potential.

[dlatin 328]

Your guess is correct, most likely. Judgments/liens in Texas mostly do not attach to homesteads. Exceptions are mortgages and tax/government liens. 
You may need to hire a lawyer for the sellers basically or pay a bill. 
The judgment is also probably dormant and now uncollectable, but that gets a little factual. 
I am with you, this would seem to be prime title company expertise, but I guess they can't rely on their own evaluations for stuff like this. 
 

Thanks, I was hoping the title company could lend more assistance but it doesn’t appear they do that, at least not this one…perhaps someone will be able to offer some direction. The property needs a ton of work and I’d like to work on it while I’m off work over the holidays.

[Hammerin Hank 1225]

I’m in title and we would never ask a third party to make a determination about whether or not a lien affects the property. We would either put it onto commitment and require a release, or not show it at all and the decision would be made by our title officers or the underwriter. I’m not a lawyer but if they don’t live anymore is it still their homestead? And if not, shouldn’t the lien attach?

[TwiceHorn 31440]

36 minutes ago, dlatin said:

Thanks, I was hoping the title company could lend more assistance but it doesn’t appear they do that, at least not this one…perhaps someone will be able to offer some direction. The property needs a ton of work and I’d like to work on it while I’m off work over the holidays.

The sellers lawyer may be slow because the sellers are a slow/no pay.  You may be able to offer a RE-TAINER or to true up their bill and get some response.

Or, you may need to hire a new lawyer to act on their behalf.  Shouldn't cost much.

[TwiceHorn 31440]

12 minutes ago, Hammerin Hank said:

I’m in title and we would never ask a third party to make a determination about whether or not a lien affects the property. We would either put it onto commitment and require a release, or not show it at all and the decision would be made by our title officers or the underwriter. I’m not a lawyer but if they don’t live anymore is it still their homestead? And if not, shouldn’t the lien attach?

Well, require a release is what's called for here. Although it is often my understanding that the letter from a lawyer is good enough.

Good point about the homestead!  No, the filing with the Tax Appraiser is not conclusive as to homestead.  If they haven't lived there and have no intention to return, it's not a homestead anymore.

Edited November 19, 2021 by TwiceHorn

[dlatin 328]

I’m in title and we would never ask a third party to make a determination about whether or not a lien affects the property. We would either put it onto commitment and require a release, or not show it at all and the decision would be made by our title officers or the underwriter. I’m not a lawyer but if they don’t live anymore is it still their homestead? And if not, shouldn’t the lien attach?

Thanks HH, would you normally help facilitate the release by tracking it down in a case like this? I think the sellers got in contact with a lawyer to look into the lien but then they never heard back from the lawyer and they can’t seem to get in contact with him. So I think we are at a point there is a judgement filed with the county on the property dated back to 2007. Looks like there is another filing on the judgement that is dated 2014. I’m not sure if the sellers have any any information about who now owns the debt. I don’t want to reach out to this group out of Austin (F BBB rating) and pay off the lien unless it is attached to the homestead because it may not be necessary. I think the $7500 debt would now be about $22k with interest. It would seem like the title company would be able determine if the lien is attached to the homestead. Perhaps I should change title companies? I’m paying cash.

There are 2 years of delinquent taxes too, and water meter was removed for non-payment.

[Hammerin Hank 1225]

Title companies and underwriters are extremely risk averse so if there’s a lien in the records they’re going to want a release. There may be an argument to be made about the age of the debt, but I don’t know all of the ins and outs there. We would usually ask the seller to get a payoff statement and release because they have some room to negotiate. Especially if the debt has been sold to a collection agency who probably bought it for pennies on the dollar. If they find out a title company is involved they know they can demand full price. If sellers approach them about a payoff they can probably settle for a reasonable price. Switching title companies probably won’t help since the company will find the same lien and you’ll probably be in the same place. I’m assuming the lien attaches to the property since the sellers don’t live there anymore 

Edited November 19, 2021 by Hammerin Hank
Edit to add that my team is mostly commercial and our clients are pretty savvy and able to negotiate. If the sellers are going to make some money on the sale it’s probably worth it for them to get someone to negotiate the payoff if they’re not able to

[Jerry Callo 8699]

In Texas, there is a process for the sellers to get the lien released from the property by filing a homestead lien release affidavit - if the property still qualifies as homestead. It requires notice to the lien holder and executing an affidavit. It fairly technical and should be done by an attorney.

[dlatin 328]

In Texas, there is a process for the sellers to get the lien released from the property by filing a homestead lien release affidavit - if the property still qualifies as homestead. It requires notice to the lien holder and executing an affidavit. It fairly technical and should be done by an attorney.

Thanks Jerry, I can see the property has a homestead exemption filed with the appraisal district. Sounds like we can hire an attorney to file a homestead lien release affidavit since liens can’t be assigned to homesteads?

[Jerry Callo 8699]

Thanks Jerry, I can see the property has a homestead exemption filed with the appraisal district. Sounds like we can hire an attorney to file a homestead lien release affidavit since liens can’t be assigned to homesteads?

That's pretty much it. Sometimes it takes an attorney to explain the process to the title folks because the lien holder doesn't actually sign a release. If the process is followed, the lien is automatically released from the property.

It doesn't erase the judgment and the proceeds from the sale retain homestead protection for a period of time, but not indefinitely. But those are issues for the sellers.

[TwiceHorn 31440]

16 minutes ago, dlatin said:

Thanks Jerry, I can see the property has a homestead exemption filed with the appraisal district. Sounds like we can hire an attorney to file a homestead lien release affidavit since liens can’t be assigned to homesteads?

Kind of want to be a little careful here.  Do the sellers own other real property in the other town? Or just rent?

If they haven't occupied and, as you said, have "abandoned" this property, it's not their homestead.  Regardless of the filing of the homestead exemption claim.  If they don't own other real property, then it's a little more arguable.

[dlatin 328]

Kind of want to be a little careful here.  Do the sellers own other real property in the other town? Or just rent?
If they haven't occupied and, as you said, have "abandoned" this property, it's not their homestead.  Regardless of the filing of the homestead exemption claim.  If they don't own other real property, then it's a little more arguable.

I don’t know whether they are renting or own. I find it hard to believe they would have the money to own another property. At the end of the day, they would probably be fine paying the debtor to be done with it and collect what’s left at closing. If there was a way to to reduce how much is collected on this long outstanding debt, that would be great but perhaps figuring out how to get the title company the payoff schedule would work too. Maybe I should be working on that angle, tracking down the payoff document.

[dlatin 328]

I stand corrected - they do own the property where they are living. I found it on CAD.

[TwiceHorn 31440]

37 minutes ago, dlatin said:

I stand corrected - they do own the property where they are living. I found it on CAD.

It's kind of a white lie that it's currently the homestead, and, as far as I can see, would only be a fraud on a 15 year old judgment debtor.

But fibbing/lying/misrepresenting in a document gives me the queasies.

A collection agent(cy) might take cents on the dollar, though.

[Ojo Rojo 1957]

Lawyer here and deal with collecting judgments regularly. The only way this judgment would attach to the property would be if the judgment holder abstracted it in the county where the property is located. It doesn't happen automatically. Unclear if the title company found the abstract or just the judgment by searching the seller's name.  If it's abstracted then it has to be cleared to close one way or the other.  Abstracts are only good for ten years then they have to be renewed or they expire.  So you just need to see what is actually there - abstract? How old? If it's not abstracted or if the abstract is expired then the title company should move forward.

[TwiceHorn 31440]

On 12/7/2021 at 1:40 PM, Ojo Rojo said:

Lawyer here and deal with collecting judgments regularly. The only way this judgment would attach to the property would be if the judgment holder abstracted it in the county where the property is located. It doesn't happen automatically. Unclear if the title company found the abstract or just the judgment by searching the seller's name.  If it's abstracted then it has to be cleared to close one way or the other.  Abstracts are only good for ten years then they have to be renewed or they expire.  So you just need to see what is actually there - abstract? How old? If it's not abstracted or if the abstract is expired then the title company should move forward.

Good point.  I had kind of ASSumed that it was an abstract of judgment/judgment lien that they found.

If the judgement has not been abstracted, there's no lien.  I don't guess you can abstract a judgment for the first time more than 10 years after the date of the judgment (you can't, assuming the judgment is dormant).

Also, there's no provision in the Property Code for renewing an Abstract.  Which is not to say it can't be renewed, but it does provide for state abstracts to be renewed while there is no such provision relating to private judgments and abstracts.

Edited December 10, 2021 by TwiceHorn

[Dr Fear 1268]

On 11/18/2021 at 7:51 PM, dlatin said:

There are 2 years of delinquent taxes too, [b]and water meter was removed for non-payment.[/b]

Impressive!  That is a bit like getting pulled over while it is raining, you gotta really piss off the cop by whatever you were doing.

[dlatin 328]

Closed on this transaction today, I learned a ton in the process.  I was able to track down the holder of the lien and negotiate a settlement.  

[Dr Fear 1268]

2 hours ago, dlatin said:

Closed on this transaction today, I learned a ton in the process.  I was able to track down the holder of the lien and negotiate a settlement.  

How is getting a new water meter going?

[TwiceHorn 31440]

2 hours ago, dlatin said:

Closed on this transaction today, I learned a ton in the process.  I was able to track down the holder of the lien and negotiate a settlement.  

Good job.  That's the cleanest way to handle it, if not the cheapest.