(Credit: Mike Warren)
A judgment lien is created when a creditor wins a judgment for a debt owed, according to NOLO, and is recorded against the property of the debtor.
For the debtor, that can mean a very surprising, costly and mandatory payout of that judgment, said judgment lien expert and nationally-recognized speaker Mike Warren. But for you, it can be your path to financial freedom and it starts no further than your own computer.
Mike Warren might never have stumbled into judgment lien investing had he never needed to go after a debt he was owed. But, what he has since discovered has earned hundreds of thousands of dollars with practically no money out of pocket.
“What I found is I can literally control these judgments on property, and it takes no more than $1 out of my pocket to control these judgments so I can make money on somebody else’s deal,” he said.
“I don’t have to buy the judgment, I don’t have to collect on the judgment, I don’t have to buy or own the property. I just get paid because I am the guy in the middle because I figured out how I could be the guy in the middle.”
In This Lesson, You Will:
- Learn how judgement lien investing actually works
- Discover Mike Warren’s secret to getting paid in just 10 days
- Find out how to get started for as little as $1-$3 in judgment liens
How Judgment Lien Investing Works
Warren said there are some 350,000 judgments on average in every courthouse in every county in the United States, and that an average of 50,000 new judgments come out of these courthouses every single year.
When he began investing in judgment liens in 1986, the start-up costs were virtually the same—almost nothing, he says—but it did require a trip to the courthouse. Today, all you need is a computer and an Internet connection to collect on this incredible business with very little competition.
But, while many investors and entrepreneurs in the judgment lien space can get paid in as little as 30, 60 or even 180 days, Warren said he has discovered the secret to getting paid in as little as 10 days.
Here is how it works:
- First Seek Out Property. Warren said the secret to getting paid in about 10 days begins with a search not for judgments, as you might expect, but properties for sale or under contract, closing in a week to 30 or 40 days. “This works on residential and commercial,” he said. “It can be houses, self-storage units… all kinds of real estate.”
- Then You Find the Judgments. Next, you’ll research to find judgments against the property owner. Just because you find a judgment does not mean it has already been recorded against their property. “Most of the time, the judgment is never recorded in land records, and is therefore never attached to the debtor’s property,” Warren said.
- Record It and Reach Out. Warren said your next step is to record the judgment with the land records office for between $1 or $3 out of pocket. Then, you’ll contact the original creditor and ask them if they’d like cash for their judgment. “Ninety-nine percent of the time, they do not know their property is for sale,” Warren said, “I’ll tell them I’ll give them cash for it, for about 3 to 5 cents on the dollar.”
- Wait for Pay Day. A short time later, the bank will discover the judgment lien on the property, and force the seller to pay off the judgment before it can issue a mortgage to the buyer.
Example: Judgment Liens in Action
As an example, Warren asks what would happen if he offered a creditor $300 on a $10,000 judgment ordered three years ago. Under the action steps above, it would look something like this:
First, the creditor will accept his right to option the judgment for $300, with time to check it out. Then, he will wait for the property to go into closing.
“When the new buyer comes in and buys the property, closes and gets a bank loan, the bank’s going to say they want a title report to make sure there is a clean title,” Warren said. “They say there is a judgment, and the seller must pay off the judgment. In fact, they are actually going to force the seller to do it.”
At the closing table, they are going to pay $10,000 on the judgment, plus the interest which has accumulated over the three-year-old debt. “On average, the interest is 10 percent a year,” Warren said. “So that’s going to be $10,000 for the judgment, and $1,000-a-year in interest for a total payment of $13,000.”
The title company will handle the original creditor, cutting a check for $300 to them. For Warren, they will cut a check for more than $12,000 after taking some fees out.
“Now that whole deal, that whole transaction cost me $1 to get the right to buy the judgment at that $300 price point,” Warren said. “I just option the right to buy these judgments at $300, or whatever the price is. On average, it takes 7 to 10 days, especially if the property is currently under contract.”
“No collections, I never go to court, I never talk to the debtor, the title company does all the work for me and they mail me a check or wire it into my account.”
The Opportunity of a Lifetime is at the Courthouse
With the hundreds of thousands of judgments awaiting discovery by entrepreneurs like you, Warren said you could make six-figures a year just filing these liens with the land office and waiting for your pay day to come.
“There are no college degrees, licensing or bonding necessary to do what I’ve done,” he said. “It also works in Canada, Mexico, New Zealand, England, works similarly in Russia and Germany. The paperwork will change a little bit in a different country. The process is essentially the same.”
The question, Warrens said, is whether you want to take the money—or allow someone else the chance.
“If an opportunity is presenting itself to you where you look for these judgments, you gain control of them for a buck you don’t even have to pay, where is your real risk? Where is your financial exposure?” he said.
“It’s in the $1 or $2 to record the judgment. That’s it.”
