I have a question about lis pendens

2 Replies

I want to know can you still wholesale a house that has a lis pendens from what I discovered about a lis pendens is that its a lean against the house and anyone who buys the house picks up the remaining amount plus what ever they have to pay on the house, and does a house or mutli family home that has a lis pendens auomatically make it bad to try and wholesale if it is possible to wholesale. Please correct anything if its wrong I'm trying to learn as much as possible.

Thank you

L/P is not a lien, yet, it is an encumbrance, it is a notice of legal action to be taken concerning the owner or property. The notice is filed in public records to alert the public that the property may have a future lien or some action that effects merchantability or title, depending on the outcome of that legal action.

Others who may file a lien may then have their lien placed in priority according to the date the L/P was filed, meaning if a lender filed a mortgage after that filing, that mortgage may be behind the judgment for a lien, depending on state laws. It can be like a potential lien holder saying ....hey, public, I'm holding this spot in the priority of liens for my pending case involving this property....be aware if you do something that my claims may be ahead of yours, if I win in that matter. So, any future activity concerning the property is done subject to the encumbrance filed.

This makes marketing such a property very difficult since lenders won't fund a loan with an active L/P filed. A buyer will not get clear title, the title company usually will not insure over it and the case must be cleared before obtaining title insurance.  

However, an L/P may not prevent a sale, a buyer could agree to assume the outcome, buy "as is" taking whatever lumps may come their way.......not very prudent unless you know exactly what the claim or the matter is. A lender starting a foreclosure may file a L/P as notice of foreclosure, but if they are paid off from a sale that matter is no longer an issue and the action is not taken.  A contractor may file to obtain a judgment for work performed, the bill might be $2,000, plus costs, that is an amount that can be determined and the claim could be satisfied from a sale.  

Now, if Mary Lou files against her ex-husband for back alimony and child support, costs of some failure to abide by a divorce decree then that may not be an amount that can be ascertained easily. You may not know what the ultimate lien might be, in which case you shouldn't accept that encumbrance. You need to wait for the outcome of that case or walk away.

Filing an L/P and not following through with that legal action can expose you to civil and perhaps criminal liabilities, filing false liens or encumbrances, so, if you file one be prepared to take it all the way. If the matter is settled out of court or legal action the encumbrance is to be removed stating the matter was settled. IMO, investors should never try to use a L/P without their attorney.

I suggest you study "Encumbrances to Real Estate" and "Liens" from taxes, mechanic's liens, mortgage liens and judicial or judgment liens.

Trying to "wholesale" a property? You'll probably be better off walking away. :)     

Thanks a whole lot bill I'm going to keep searching for properties but this was very helpful didn't know what it meant but I know now @Bill Gulley

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