From the Ask the Broker inbox:
I’ve put an offer in on a home and found out it has a “Lis Pendens” on it. I asked my agent what that meant and she didn’t know. Can I still buy this house?
It would be better to have a probate real estate agent for this kind of situation. However, I’ll resist the temptation to say, “find a new agent” especially if you’re under contract—it’s a little too late for that.
Lis pendens is Latin for “suit pending”. The book definition is:
Lis pendens is a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property. The lis pendens (or notice of pending action) is filed with the clerk of the court, certified that it has been filed, and then recorded with the County Recorder. This gives notice to the defendant who owns real estate that there is a claim on the property, and the recording informs the general public (and particularly anyone interested in buying or financing the property) that there is this potential claim against it. (source)
So what does this mean in English and what does it mean to a potential real estate buyer?
In a nutshell, if there has been a lis pendens filed, someone is saying, “Hey, I have a piece of this property and you can’t have it.” They may (think) they own all or part of it, or they may have a lien against it and they have (or are about to) file a law suit stating their claim.
Now whether or not this claim is true may, or may not, be a different story. That will be up to the court to decide.
A lis pendens will place a “cloud” on the title that will have to be cleared before you can take title to the property. I haven’t met a title company yet that will issue title insurance if a lis pendens has been filed. They can’t, as they don’t know if the title will be clear to transfer to you, the prospective buyer. No title insurance, no loan.
Now this isn’t to say that a lis pendens will prevent the purchase of a property, but it will have to be resolved. In these days of frivolous litigation, many of these things just fall apart as they progress through the system, the lawsuit is dropped, and the lis pendens is removed. If you are a cash buyer, and for some ridiculous reason decide you don’t want title insurance, a lis pendens won’t prevent a sale. Just be aware that should the reason for the lis pendens be true, you may not be able to take the title or you may have to cough up more money to satisfy a lien holder. This just goes to show how important a Municipal Lien Search is to ensure there won’t be any hassles in the transfer of ownership of the property you’re purchasing.
What are some reasons a lis pendens is recorded?
In my experience, divorce or separation situations take the top slot. Mikey and Susie are married and they hate each other. Susie says, “Oh fine, you can have the house, just get out of my life”, so Mikey puts the home up for sale. Susie comes to her senses and realizes her soon to be ex is going to pocket some cash from the sale. So Susie’s divorce lawyer slaps a lis pendens on the the property until he figures out how to get Susie’s (and his) slice of the pie. Typically they will duke it out, resolve their differences, and the home will be sold.
Inheritance disputes often result in litigation. Let’s face it, when people die and will real property to an heir, others often come out of the woodwork and make a claim to the property.
Sometimes lenders will file a lis pendens on a property when they think foreclosure will be necessary. This stalls any attempt to sell the property to evade foreclosure.
There are a litany or reasons a lis pendens may be recorded. A title company will research the situation and should be able to advise you and your agent of what will be involved to clear the cloud on the title. Attorneys may or may not have to be consulted.
Can you buy a property that has had a lis pendens recorded? Yes. Just be careful and make sure you understand all of the potential ramifications.
Photo Credit: Creative Commons photo by umjanedoan
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Nice job, Jay. You tackled a subject many agents aren't very familiar with, and you did a great job explaining it in layman's terms. Kudos!
**Jacki´s last blog post..Using Self-Awareness to make it through Tough Times</abbr></abbr>
That's why I always suggest to clients if it is an older home or has a lot of history, that they get title insurance. It is peace of mind that way.
Great information! I love how clearly you explained this to the clients. There is nothing worse than trying to sell a home and then a lawsuit jumps in the way…..
**Portland Real Estate´s last blog post..Hair of the Dog, Pet Grooming</abbr></abbr>
Jay… great perspective. With most of my buyers and seller, I explain the troubles they can when lawsuites are pending. With the current inventory numbers there is no reason buyers can't find what they are looking for without spending time waiting for a lawsuit resolution!
**Dan Edwards´s last blog post..Bellevue Towers – A GREEN luxury Condo in the heart of downtown.</abbr></abbr>
Jay – man, you're speaking the language of LOVE here in Polk County, FL! We see this all the time.
Dan – AMEN! Again, here in Sunny FL (Jay – your video post on Mike Miller's blog was classic!) – we have more REOs and Short Sales than you can shake an Alligator at! Though, I'd most likely opt to shake a stick – as the gators down here can get a bit chompy.
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good Post jay , I had never heard of "lis Pendens " before this . Thanks for the information
THIS is the sort of stuff that should be taught in pre-licensing but, atleast here in Ohio, gets looked over. Sometimes I think those courses make one less intelligent.
Thanks for the explanation Jay – I've never heard that term before…I'd think it's pretty important for an agent to know what it means and what it could mean for a client.
@Dani – they don't teach this in real estate school?
Ok I'll say it. Get a new agent. How can you not know what a Lis Pendens is after going through real estate school (and continuing education)?
Jay,
It drives me nuts what simple things, from pre-licensing, that agents can't seem to remember.
Here's what brought me out of my reader… This is a great post and you're a smart guy; but doesn't it bother you a bit that someone else's client had to go to your site to get knowledge that their agent really should know?
Here's a hint for your readers – If you trust Jay enough to ask his opinion, than hire him to use that knowledge to protect your interests!
Even if the agent didn't know, they should have (at a minimum) stumbled through it and Googled it when they got back to the office 🙂 "I don't know" is never a good answer, as opposed to "I will get all the facts and get back to you". Just saying…
🙂
**Matthew Rathbun´s last blog post..Moral Dilemmas of Managing Connections</abbr></abbr>
Matthew –
Yes, it bothers me that someone comes to me for free advice while their agent, who doesn't know a fundamental definition and as you point out is apparently incapable of even looking it up, gets paid.
And it happens a LOT. Not just here. Look on an open forum like Trulia Voices. People are always asking questions that their agents should be able to handle.
I also get a lot of people that come here and register for the home search, on the advice of their agent. It floors me how a real estate agent can say, in effect, "My web site sucks, so go to this agent's site and use his tools. Then come back and pay me".
Hi Jay,
You don't know me but I understand you know my husband from the RE.net. Was up early this morning and almost screamed when you wrote… "I also get a lot of people that come here and register for the home search, on the advice of their agent."
That happens ALL the time on my blog and it makes me mad as heck. What's even funnier is when we contact the "buyer", they openly tell us that so and so sent us here. Even worse, we've had agents register becasue our site is "easier" and faster than the local MLS.
Amazing isn't it?
**Robin Sing-Cunningham´s last blog post..Fort Lauderdale Foreclosures</abbr></abbr>
Hey Robin –
It is truly amazing. I can't imagine telling one of my clients to go to another agents site. And if I were a client, I'd have to seriously wonder about my agent and their own ability if they did that.
It drives me insane.
Tell Barry I said howdy!
Just because you passed a test dosen't mean that you are qualified to be helping people make the biggest investment of their lives. A system should be started where all new agents have to job shadow an experienced agent for some time.
This is a perfectly written post. It's so important for not only buyers to understand this, but also those who run across it when purchasing a home. Agents should be educating themselves on this and other issues to make sure they are providing the best possible counsil to clients. Thanks!
Just to clarify, Ohio DOES teach this in licensing courses. However, it's more likely to be referred to as a "cloud". Our contracts allow the seller 30 days to clear it up if a cloud is found. If it can't be cleared then the contract is null and void.
**Elaine Reese´s last blog post..Social networking – are you a follower or a BFF?</abbr></abbr>
Wow, Jay-as much as I want to say that was a GREAT post explaining Lis Pendens, I am just stuck shaking my head at an agent sending THEIR CLIENT to you for answers. I just can't fathom what kind of realtor would do that….I'm going to say it: That buyer needs a NEW AGENT because their current one doesn't understand basic real estate language.
Wow, Jay, I am really in shock that other agents would send their clients to your site for answers, MLS searches, information….I really hope those clients realize they have HORRIBLE real estate agents and they need to go sign on with you, since they are already having to ask you all their Phoenix questions…..crazy.
"I’ll resist the temptation to say, “find a new agent”."
I would so have to agree. Even if the agent didn't know what it was, which apparently they didn't, they should have looked it up for their client!
Jay, given the current market situation this is probably a great time for this post. I would like to know how the buyer found out about the lis pendens. As stated in the "book definition" it would be recorded. Albeit, it would have no legal effect on the property unless it is recorded.
**Minnesota MLS´s last blog post..Foreclosure Video Worth Watching</abbr></abbr>
What are you guys talking about. I love agents that aren't professional, don't have a clue, and have no knowledge of the local market. Take last week for example. I got a call from a buyer who said the agent they had been speaking with told them to rent a car when they got to Scottsdale because he didn't carry insurance for him to drive them around to look at houses. The agent also told them to go to Trulia and find houses that interested them (instead of just setting up an email home search…duh)
Long story short, I took care of them, was professional, answered their questions, showed them houses for the last 3 days, and am writing a contract on a $1,000,000+ home tonight while watching basketball and catching up on a few blogs. Unfortunately (for them), there are a lot of agents out there that make those of us that take our careers seriously look real good.
**Barry Cox´s last blog post..An Owl Takes Refuge At A Scottsdale Foreclosure</abbr></abbr>
You got it Jay! Lis pendens means that you aren’t doing anything in the near future with that property. Also as a side note, I believe that currently it is not possible to finance a condominium if there is litigation going on with the association.
**Ryan´s last blog post..Bellingham Washington Foreclosure List
What a great way to explain Lis Pendens in laymen term for the consumer. It is a real shame that real estate agents still don't know this terminology. What kind of message is being sent to the consumer?
I wonder if that client stayed with that realtor…I would be rather surprised; that was horrible customer service and a poor display of resources.
I am rather shocked a realtor would send their clients to you for answers-a huge sign they are not professional, to me. Anytime I don't know the answer, the answer for my client is "I will quickly find that out for you" not "Go to this realtor's site…" I hope that realtor figures out what a poor job he/she is doing, or they won't be in business long.
First off, I must shake my head at any realtor that would send a client to ANOTHER realtor for an answer. Sigh. Second, wanted to say you did a great job of filtering all the jargen into a simple, yet complete, explaination of Lis Pendens. Great job
Funny I should run across this post today. Buyers closed early Friday afternoon and then when the title company went to record on Monday they discovered a Lis Pens had been filed late Friday afternoon. Buyers are in new home, title company can't record, lender can't fund loan without clear title and buyers are sitting in their new home which really isn't their home. It is a frivolous lawsuit filed by one builder against another. Have two other closings with the same builder pending that might not close. Oy!
**Cindy Jones´s last blog post..Lowvall Offers are Dead on Arrival</abbr></abbr>
It's an interesting subject. I'd never heard of it before but I'm surprised agents haven't. I suppose in a divorce there are often going to be disputes over who owns property so it makes sense that that could cause this kind of situation.
Iwas not disclosed and bought a house that had a pending lawsuit, a lis pendis had not been recorded yet and but the lawsuit was against the seller and the property. It was of county court records but the realtor nor the seller didnt disclose. Title company didnt catch it either. So now that I purchased the home the neighbor who filed the lawsuit 4 months prior to the purchase of the home attached me the new home owner to the lawsuit. Shouldnt title protect me from any pending lawsuit?Property is in Missouri
I was not disclosed and bought a house where the seller had a pending lawsuit, at the time of closing. A lis pendens had not been filed or recorded but the lawsuit was against the seller and the property, over an easement issue. The lawsuit dockett was in the county court records but the realtor nor the seller didnt disclose. Title company didnt catch it either. So now that I purchased the home, the neighbor who filed the lawsuit 4 months prior me purchasing the home. Has now five months later he attached me the new home owner to the lawsuit. Shouldn't title have protected me from any pending lawsuit? The City allowed the home to be built 10 yrs ago with execptions to the property boundaries on the lot so the driveway is short and everytime someone parks in my driveway half of their car is in the ingress egress of the road easement. Which the neighbor claims is interfering in his enjoyment of the road easement. Since attaching me to the lawsuit he has become hateful and harassing to me and my child. I am living like a prisoner in my own home to avoid him and his whole family. I didnt realize I would go broke from attorney fees and am about to loose the first home I ever bought and my sanity from trying to acheive a dream. I thought that was what title insurance was for? But they are denying my claim. Please help any ideas?Property is in Missouri
I really enjoyed the info on the word lispends. I always tell people do a preliminary title search yourself when ever you think you are interested in a property. County records can tell you 75% of the story.