Collecting small claims judgments with real estate liens can be a very effective way to secure your money owed to you. It is, however, not always the best way.
Judgment liens are different than mechanics liens used by contractors. When you take your case to small claims court and you are awarded a decision in your favor you obtain a judgment. Once you have it, you have the right to file that judgment against a piece of real estate owned by the defendant in the case.
The benefit of using a lien against real estate is the owner cannot sell or refinance the property without paying you. To use this valuable tool to best advantage, there are some things to remember.
First, how to know that there is equity in the house to cover the amount owed to you? A person who owes you money likely owes money to someone else too. Liens are paid in the order they are placed on real estate. Also, judgment liens come after past due taxes and mortgages. So if there is are tax liens, a large mortgage and several judgment liens before yours, there may be no money left to pay you.
It is possible to research how many liens are filed against a piece of property. Land records are kept at the county or town level (depending on where you live). Some records are kept online, while others or not. If you are interested in doing this research, start by calling the clerk in the town where the property is located, and you should be able to figure out where to start.
Compare the value of the current value of the home to the amount of liens against the home, and you will have a good idea whether or not there is enough equity to pay your lien.
The process of researching land records can be confusing and time confusing, and it may be better to get some professional help. There are many collection agencies or attorneys who are experienced in the process. If you hire a collection agency or attorney, make sure to instruct them not to file the lien if there appears to be enough equity to pay you when the time comes.
And on the issue of time – it may take years for someone to sell or refinance. Are you willing to wait? Is there a better way to get paid more quickly? Collecting small claims judgments using wage garnishments or bank executions may be quicker and make more sense.