If you’re trying to sell your home or complete some sort of refinance, it can be stressful to hear that you have a lien attached to your property.
If you have a lien attached to your home, at some point in the past, a creditor likely received a judgment against you for unpaid debt and then attached their interest in the unpaid debt to your home.
This means that, in order to complete your sale or refinanced, they will have to release their lien.
You will receive a lien release if you pay the amount you owe in full to the creditor OR if you negotiate a settlement with them and receive their approval (in writing!) to pay less than the total amount owed.
The good news is that you may be able to get the lien released for less than the amount owed. It can be tricky, but depending on the negotiability of the lien, it may be worth seeing if they will accept a settlement offer:
Here are the steps to getting your lien released:
- Locate your creditor and find out how much you owe.
- This can often be the most challenging part of lien negotiation. Creditors sell debt quickly and frequently so it can sometimes be challenging to locate the creditor that is handling the debt, especially if the judgment is more than a year old. Sometimes, locating the creditor requires cold calling debt collection companies until you find the one that took it. Sometimes, locating the creditor requires following a chain of services releases until you find the creditor that has ownership over the debt.
- Once you know how much you owe, your next step is to:
- Figure out whether it is worth it to try and negotiate the lien or judgment.
- Some liens are negotiable and some aren’t. If there is a chance that you can pay the lien off for less than you owe, you want to take advantage of that opportunity but if the lien is not negotiable, you want to know that up front so you don’t waste time.
- If you’re able to pay the amount, you believe you owe the money and the fees added seem reasonable to you – you will pay the creditor and receive your lien release.
- If you do not have the funds or believe the amount should be negotiated, your next step is to:
- Negotiate with the creditor.
- Negotiation is an art. Simply saying to your bank “can I pay you less than what I owe?” will likely cause the creditor to just say “no, we want full payment.” You need someone to look at what you have going on financially to figure out how to request your settlement in the most persuasive way.
- Sometimes, this involves drafting a persuasive hardship letter outlining why you do not have the funds to pay the amount in full. Other times, it may be beneficial to provide limited financial information to show the creditor that you have no funds to pay the full amount.
- Sometimes, timing is the key to getting a lien settled.
- Depending on what you have going on with regards to the value of your home and individual financial situation, your strategy will change so make sure you run this by an experienced negotiator.
- Note: The worst thing you can do is provide all of your financial information to a creditor if your financial information shows that you have plenty of money to settle the debt. If this is the case, you will want to take a different tactic.
- Once the creditor replies, you’ll want to:
- Figure out if you’ve been offered a “good settlement.”
- Creditors are in the business of taking advantage of you in order to get the most money possible. If you’re trying to negotiate by yourself, they may make you an offer for settlement early in the process but it’s hard to know if you should continue negotiating or take the deal. It’s helpful if you have someone helping you who knows when you’re being offered something reasonable or when you’re being made a “first offer” that should be pushed back on.
- Use the negotiation timeline to your advantage.
- Some creditors are very motivated to settle because they get financial incentives to settle quickly and close their files. Other creditors are small, disorganized, and unmotivated by time considerations. If you’re looking at completing a sale of your home or a refinance, you will need to know how long it will take to complete the settlement process so you can decide whether it’s worth it to you to try or whether you’d rather pay them off and move on.
If you have a lien attached to your home and would like to chat about your options, feel free to give me a call at (425) 654-1674.