Southwest Florida Title Insurance & Real Estate Blog -

This was a great question I was asked earlier this week, during a short sale process presentation I did to a group of REALTOR’s from Sellstate Priority Realty, a very successful brokerage in Cape Coral, Florida.  It was a very engaged group, and I was glad when someone asked a question about what to do about a junior lien in a primary home short sale scenario.

Here is a short video clip (about 4 minutes) that addresses this common issue:

So as you heard, Liz and Lynda presented the following scenario of a primary home short sale of a Cape Coral property. The owner of the property is disabled and can no longer afford the home.  Here are the details:

* $175,000 mortgage and note balance
* $50,000 approximate home value
* $10,000 judgment from credit card company (junior lien)

Many people think that the existence of a junior lien on property is the death knell of primary home short sale.  That may be true in the worst case scenario – where junior creditors are obstinate and will not settle for less than they are owed; but there are options for dealing with them.

The problem, of course, is that in order to issue title insurance to the buyer on a primary home short sale, we must be sure that all liens and encumbrances are cured or cleared from the property’s title.  One could always negotiate with the creditors to arrange for the release of their liens in exchange for something.  But the most notable and powerful tool in Florida is the Notice of Homestead.

The Florida Constitution provides, in Article X, Section 4,

(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:

(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family (emphasis added) . . .

. . . which means, in layperson’s terms, that judgments from a credit card company, for example, would not attach to or affect the interests in one’s homestead property.

As you saw in the video, I first asked Liz if the owners resided in property as a primary home.  When she confirmed that they did, I recommended that they file what is called a Notice of Homestead in order to clear the liens in question from the title to the property.

The Notice of Homestead is provided for in the Florida Statutes at Title XV, Chapter 222 – Method of Setting Apart Homestead and Exemptions.  In a nutshell, the statute provides that a resident of the state of Florida may take advantage of the Constitutional Homestead protections introduced above by filing a signed statement known as a “Notice of Homestead”.  The statute even provides the proper form, to wit:

The Notice of Homestead goes through the following procedure:

  1. The owner of the property files in the public record a complete, signed and notarized Notice of Homestead.
  2. The clerk’s office notifies all of the judgment creditors on record of the filing of the Notice.
  3. The creditors have 45 days after the mailing of the notice to file a response or to challenge to the notice.

Should the creditor not challenge the owner’s declaration, the creditor’s judgment lien would not affect the title to the property. And thus we could issue title insurance to the buyer of the property and, if they are financing, to the buyers’ lender.


So the next time you are faced with a short sale property that is encumbered by junior liens, don’t write it off as impossible.  Consider whether or not the liens may be avoided using the Notice of Homestead.  As always, we are more than willing and able to review the situation with you and to, if possible, to assist in the drafting and filing of the notice.


Are you dealing with a bank short sale and concerned about a junior lien? Call (239) 985-4142 or Contact us online to learn more about our the Short Sale Success Stories.

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NOT LEGAL ADVICE: This information is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. This information is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel.

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