Q: I hope you can help us. We received written approvals from both lenders for the short sale of a home we are trying to purchase. We opened escrow and we signed our loan documents earlier in the week.
Yesterday, however, the short sale agent told our agent that a government lien was placed on the home. He is going to try to discharge it, but as of right now, everything’s on hold.
I didn’t receive much more information after that, so I did my own research. I discovered that the seller pleaded guilty to a conspiracy charge and received three years of probation. He must make restitution to all his victims.
Since he claimed extreme economic hardship, he was allowed to pay a small amount per month starting this past June. Is there any way the lien can be taken off the property since it is a short sale and the seller is not profiting from the sale?
Is this going to be a lengthy process?
A: More likely than not, the process of getting the lien removed will be a lengthy process. If the lien is due to a federal case, you would need to contract the federal prosecutor in that case to determine whether they would be willing to remove the lien. If the lien is as result of a state criminal case, you would need to contact the state’s attorney to determine if they would be willing to release the lien.
In either situation, the attorney in the case might require the seller to petition the court to allow the removal of the lien. At times, the process can take a while to wind through the court system. The timing is very dependent on the type of case, the parties involved and the willingness of the government attorney to review the facts.
If you have an attorney that is willing to cooperate with you, then the question is whether the seller is willing to work with that attorney as well to remove the lien.
While you are right that the seller will get nothing in the short sale, the government has nothing to lose by filing the lien and delaying things. The government may not get anything by going through the short sale and will get nothing if the home goes into foreclosure.
However, as long as the seller and owner of the property is still in the home and making payments to the government, the government is getting more than it otherwise would get. From the government’s perspective, waiting and receiving payments while the case is ongoing is a better choice than releasing lien and receiving nothing.
If the seller can work out a deal with the government’s attorneys, then you should be able to proceed with the closing. Until then, you will be at the mercy of the seller and his or her dealings with the government’s attorneys.
Sam recently dealt with a similar case in his practice and in that instance, the buyers decided not to wait for the seller to figure out what to do and they moved on to a different property.