Seller Must Disclose Unrecorded Judgment

Question: Three years ago we lost a business dispute with our partner in our Casa Grande tire business. Our partner now has a $33,000 judgment against us. We are now in escrow to sell our Casa Grande home, and expect to “net” $50,000 proceeds after payment of this $33,000 judgment. The title commitment, however, does not show this $33,000 judgment. In fact, the settlement sheet from the title company currently shows that our “net” proceeds will be $83,000, not $50,000. Are we required to tell the title company about this unrecorded $33,000 judgment against us?
Answer: Probably. In addition to checking with the County Recorder’s office for any judgments, the title company generally requires full disclosure from a seller of all judgments. The primary reason is that if the $33,000 judgment was actually recorded but missed by the title company, the title company could have liability after the close of escrow to your buyer to pay the $33,000 judgment.