Definition:
A judgment lien is a legal claim placed on a person’s property by a court when that person loses a lawsuit and owes money. It gives the winning party the right to collect what they’re owed by forcing the sale of the property, if necessary.
Example:
Kevin loses a lawsuit and is ordered to pay $25,000. Since he doesn’t pay right away, the court issues a judgment lien against his home. If Kevin tries to sell or refinance the house, the lien must be paid off first.
Explanation:
Judgment liens are often the result of unpaid debts from lawsuits, such as unpaid loans, unpaid services, or damages awarded in a civil case. Once the court issues a judgment, the creditor can file the lien in the county where the property is located.
The lien becomes part of the public record and attaches to any real estate the debtor owns in that area. It doesn’t force the immediate sale of the property, but it must be paid before the property can be sold or refinanced. In some cases, creditors may request a foreclosure to recover the money.
A title search performed during a home sale or refinance will uncover any judgment liens, which must be resolved (usually by paying the debt) before the transaction can move forward.
Why is Judgment Lien Important in Real Estate Transactions?
Judgment liens are important because they affect the ownership status of a property. For buyers, a judgment lien is a red flag and must be cleared before closing. For sellers, it can delay or derail a sale if not addressed. Understanding and checking for judgment liens ensures smoother transactions and protects everyone involved from legal or financial complications.