Why a Lis Pendens Matters for Home Buyers and Sellers

Lis pendens is a Latin term that literally means that a suit is pending. While a lis pendens can technically refer to any pending lawsuit, in legal parlance it is most often used to refer to claims concerning real estate. A lis pendens can have a significant impact on the attractiveness of a property, to the point that it could lead to a dramatic decline in that property’s value. As a result, anybody who is considering buying or selling a home should be well aware of what a lis pendens is and how it could affect his or her real estate transaction.

Why a lis pendens matters

A lis pendens is a public notice that is recorded in county real estate records. This notice is recorded to notify the public, including potential buyers and sellers of the property in question, that a lawsuit involving that property is pending. A lis pendens matters because if a buyer purchases real estate with a lis pendens against it, that buyer will still have to abide by the final result of the lawsuit. In the case of a house being foreclosed, for example, a lender would file a lis pendens against the foreclosed home. Lis pendens, however, are not related exclusively to foreclosures, as the following example shows.

 An example

 Say person A intends to sell his property to person B. The two sign a contract for the transfer of the property, but person A decides that person B has breached the contract. As a result, person A refuses to sell the property to person B, but person B sues person A for refusing to sell the property. As a result, a lis pendens is filed against the property. While the lawsuit is still pending, person A then sells the property to person C, but afterwards a court rules in person B’s favor, thus giving the title of the property to person B. As a result, person C loses his title to the property and his only recourse for recovering the money he paid for the property is to get it back from person A, the original homeowner.

How a lis pendens impacts property value

 A lis pendens does not prevent a piece of real estate from being bought or sold, but it usually has a major impact on how desirable a piece of property will be to prospective buyers. As the above example shows, a lis pendens could ultimately result in a new homebuyer losing his or her title to the property. Of course, most homebuyers do not want to take the risk that a lawsuit could compromise their ownership of the property and will shy away from a home that has a lis pendens attached to it. As such, unless the lawsuit is resolved quickly, a lis pendens is likely to have a negative impact on how much a buyer is willing to pay for a home.

Because a lis pendens can have such a major impact on a property’s value, it is vital that prospective homebuyers and sellers become fully aware of what a lis pendens is. Armed with such knowledge, buyers and sellers can make more informed choices about how to proceed with future real estate transactions.

 

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