You come across a home you love only to find that it is lis pendens. What does this mean? Will it affect your chances of buying the home?
Unfortunately, when a home has this status, you should steer clear of it. In general, it means that someone else may stake a claim in the home. Is that a chance you are willing to take? We’ll explore the topic in detail below.
The True Definition of Lis Pendens
Lis pendens means a pending lawsuit. Do you want to buy a home that has a pending lawsuit on it? If the plaintiff wins the case, they could take the home that you just bought. While the status shouldn’t prevent you from purchasing the home, no lender will allow financing on a home that could end up lost in a legal battle.
Basically, this term is a warning to potential buyers that there’s a lawsuit involving the property. Just because the property changes hands doesn’t mean the person filing the suit can’t take the home if it’s determined that it belongs to them.
Here’s an example:
Joe signs a contract to buy a home from John. After a few weeks, John gets a weird feeling about Joe, thinking he is going to bail on the purchase. He doesn’t have anything concrete that proves this, but it’s his feeling. Rather than getting taken advantage of, Joe signs another contract with Jan. In fact, Jan closes on the house within a matter of a few weeks. Just before the closing, though, Joe comes back and wants to close on his deal. Once he finds out about the new contract John signed, he files a lawsuit against John for the property. Joe also files a lis pendens with the county. This lets any potential buyers (including Jan) know there’s a lawsuit involving the home.
If the court found Joe to be right, Jan would have to give the home up to Joe. She would then be out the money she paid to John for the home. It would turn into a large legal nightmare, then as Jan tried to get her money back from John.
Reasons for a Lis Pendens Status
There are many reasons people file for a lis pendens status. It’s not just when someone breaches a sales contract. There are everyday situations that can occur:
- Divorce issues – If a couple is in the middle of a divorce, one spouse may file a lis pendens on the home. This usually occurs when the home is only in one person’s name. The other party gets worried that their ex-spouse may sell the home before the divorce proceedings are settled. In order to prevent this, they file a lis pendens to let others know not to buy the home.
- Foreclosure proceedings – One of the first things banks do when they start the foreclosure proceedings is file a lis pendens status on the home. Again, this lets potential buyers know that there is a fight for the ownership of the home. This prevents the owner from selling the home and leaving before the bank has a chance to get it back.
- Homeowner’s association issues – Homeowners that are seriously delinquent on their homeowner’s dues may have a lis pendens filed on their home. This lets potential buyers know that the association is coming after the property. However, homeowners usually have to be seriously delinquent on their homeowner’s dues before this happens.
Wait for the Home to be Out of Lis Pendens
Luckily, homes can be taken out of lis pendens status. You just have to wait until the dust settles. In the case of a divorce, the home is out of this status when the divorce proceedings are final and the assets have been distributed. Of course, the plaintiff won’t remove the status until they satisfactorily receive their share of the assets. This includes the assets from the home.
Any other reason for this status on your home can be removed once the situation resolves itself. For example, if you were in foreclosure proceedings but were able to bring yourself current, the lender can remove the status. The same is true if you get up-to-date on your homeowner’s association dues.
Generally speaking, you won’t be able to buy a home that is lis pendens if you need financing. If you buy cash, however, there isn’t anyone stopping you from making the purchase. If the title company tells you of this status, though, you should be leery. Wait until the issues are fixed and then you can buy the home. It’s too risky to buy a home that someone else may be able to claim down the road.