Fighting Over Credit Card Lien Releases on Short Sales

Posted on April 5, 2013 by

Working on short sales is always exhilarating when you receive updated title work which shows there are additional liens against the property. Many Realtors, Investors and Short Sale Negotiators aren’t knowledgeable or prepared to fight the fight against Credit Card Liens on short sales. I recommend that the first thing you do when working a short sale is to order a title commitment which will do a search to see if there are any liens on the property. Are you aware that the title companies also do a name search for your Seller and Buyer? When a name search is done against the Seller, any outstanding judgments or liens show up on title. In addition, the title company is to order a lien search against the property for water, sewer, and code violations which cost approximately $140. Due to the cost, this additional lien search is done right before closing. I always recommend that the Realtor or the Investor make a personal call to the water, sewer and code violation departments as soon as they start negotiating their short sale. By making the personal call, you can minimize some costs versus have the title company search for you. Some counties provide this information online. However, don’t depend on your inexperience of checking liens on the property, I would highly recommend that you contact the County Department and talk to a live person for confirmation.

After a name search is run on the Seller, if there are any outstanding credit card judgments they will have to be paid off at closing in order to give clear title to the Buyer. Unfortunately when dealing with credit card judgments, you have to deal with attorneys that represent the credit card companies. Many attorneys are not aware of how a short sale is done. They are only driven to get the Seller to pay money for a full satisfaction or get 50% of the balance for a partial release which allows the Seller to sell the house but still be responsible for the difference.

Right now I am fighting this battle. I have a property wherein the Seller purchased the property with a Chase Mortgage in her own name. She transferred the property into the Trust as she had attended too many seminars and assumed this was the right way to do it. Unfortunately, when she did she didn’t include the marital status of all parties on the Deed so we had to chase the previous seller to clear up title by signing an Affidavit stating their marital status. NOTE: To all investors who are preparing their own paperwork, make sure that all parties have the marital status of all parties. The property was originally homesteaded so it pulled in the husband as having an interest pursuant to the guidelines of the title company. The homestead exempt was lifted and placed on another property now making this an investment property. However, because she was married at the time of the purchase, the title company’s underwriter will not insure the property unless all liens are released. This also included the liens against the husband, even though his name is not on title.

In addition to shortsaling the 1st lien, I have 6 additional liens to negotiate partial releases which would release the liens against the property but the seller and the husband would still be responsible for the difference. LISTEN TO THIS: The short sale lender is Chase and is awarding the Seller $30,000 as an incentive to do a short sale!!! Since their loan was taken out in 2007, I believe that this loan has all the mistakes as cited in the Robo signing incident. The short sale lender normally does not allow the Seller to contribute any funds towards lien releases except this lender is allowing the sum of $500 per lien release to be paid out of the incentive just to get the deal done. The short sale was approved for February 25, 2013 and the short sale lender will not give us an extension until we provide them with a Letter of Direction from the Seller stating that each lien holder would receive $500.00 paid from Seller’s $30,000 incentive and copies of each of letter stating that the liens will accept the $500.00.

I am dealing with Citibank (credit card) that is in 3rd position as a lien holder that is owed approximately $32,000. I have spoken twice to the attorney to get them to accept $500. They have denied it twice even though I showed them that Chase is taking a discount of $600,000 and the other liens are accepting the $500, which their liens are much higher than Citibank. So what do you do??? The attorney that I have been dealing with claims he has submitted this information to his client, Citibank, and that they want $15,000 to settle. I have explained that is not going to happen because the short sale lender is dictating how much they can receive. The attorney stated to me that this is their only chance to get paid as they know that the husband can file bankruptcy and then they get $-0-. I have a letter from a bankruptcy attorney for the husband stating that he, in fact, was going to file bankruptcy but … if I informed the attorney of this fact, then they would not settle for less. I informed the attorney that I don’t want a full satisfaction, where it totally releases the liability of the husband, but instead I want a partial release. I am getting nowhere with this attorney. I asked for a supervisor and will fight the good fight with him to see if I can get him to get it released. However, my experiences with attorneys are that because they are debt collectors they don’t understand the short sale guidelines, so they will not settle. I have even asked for a release for $500 and a payment plan for the difference and the attorney’s answer was “No.” So … what do you do? I went straight to the credit card company’s main office asking for their legal department. I have done this plenty of other times with other credit cards. I know if I can speak with someone in the legal department at the main office of Citibank who has the authority to accept the $500 and explain the situation, they will advise their attorney to accept the lien release and may even, if need be, accept a payment arrangement. The last call I made like this to Target’s legal department on another deal, we did a 3 way right then and there and we got it approved.

My other options are that the buyer pays some money towards the debt, the Realtors contribute and the title company reduces their fees so they can also contribute. This is my last choice because this is a flip. If this was a listing where I was acting as the realtor, then the buyer would be my first choice, since the buyer will benefit from the purchase of the home.

Moral of the Story: Don’t give up on any lien releases! You need to do is talk to the right person which is always the Plaintiff (credit card company) and tell them the situation. You always have to go around the attorney and go directly to their client. Many times the attorneys, because it doesn’t meet their guidelines or it doesn’t make any common sense to them to accept $500, will not even send it to their clients as their job is to get as much as they can or just deny the offer and still get paid from their client.

Just to let you know some numbers on the deal, the buyer is purchasing it for $160,000, it needs about $30,000 in repairs and in the end the property will sell for high $350,000. These are projections and just because there is a huge profit doesn’t mean that I shouldn’t continue to fight the good fight. You may say, “with all that profit, why not just give ‘em what they want and pay off the liens and you will still make money?” I don’t leave any money on the table. If there’s room to negotiate for a larger profit, then I will fight the good fight!

I hope this article helps all you Short Sale Investors, Realtors or Negotiators out there as I never give up on a deal! Remember the most important thing is to get title work as soon as you start the file and ask for an update in 60 days when you know you are getting near a closing date. This way, you will not be fighting a fight when a foreclosure sale date is in the near future. I always say “all crazy deals make me wanna smoke, drink and swear” and I don’t do any of those things. Well… gotta go have a cigarette!

Happy Negotiating!

Kimberlee Frank

Kimberlee FrankKimberlee Frank is a Master Negotiator who has closed over 600 deals since 1998. She is a Mentor, Trainer, Author and Real Estate Broker teaching Investors and Realtors how to creatively purchase and sell short sales with her Step-by-Step System. She has helped Investors and Realtors earn hundreds of thousands of dollars.

Contact Kimberlee Frank


Leave a Reply