When you suddenly find a foreclosure board in your yard, you may be surprised to find that you have no outstanding debts to any creditors. Instead of continuing to wonder why your property is in foreclosure, it’s best to figure out what really happened.
You should know that foreclosure does not only occur on a property that is used as collateral for a loan or to individuals who have a loan that cannot be settled. However, there’s something called “Lis Pendens Foreclosure,” which is used when certain things happen.
Well, it could be that the seizure on your property is under the condition of Lis Pendens foreclosure. So, it’s best for you to find out what it is, how it works, and when it can be used for.
Okay, here’s everything you can know about Lis Pendens foreclosure!
What is Lis Pendens?
The term “Lis Pendens” comes from Latin, which means suit pending. It is often used in judicial foreclosure, which is closely related to real estate.
As the name implies, Lis Pendens foreclosure could mean there’s a pending lawsuit or other claim on a property. Further, this is an official notification to the public that the property has a pending lawsuit or claim.
In judicial foreclosure, the concept of Lis Pendens is to notify that the buyer of a property must bear all legal claims regarding the property.
For example, someone buys a property that is actually in Lis Pendens foreclosure. Then, if the bank or some entities sue the property, the new buyer is also liable for the lawsuit. This is because the sale of the property cannot stop the lawsuit through litigation.
How Does Lis Pendens Foreclosure Work?
Basically, Lis Pendens serves as a constructive notice or a type of warning to prospective buyers of a property that ownership of the property is in dispute and litigation is ongoing.
Actually, Lis Pendens can have a negative impact on the selling price of a property or even the possibility that the sale may not take place since pending litigation will usually prevent the owner from selling the property.
Since it is a document filed with the county registrar’s office, the Lis Pendens is a matter of the public record, so anyone can know that a lawsuit has been filed against the property.
Lis Pendens begins with the process of filing a lawsuit by the mortgage lender or other entities. They must file it with the county recorder’s office, which is a requirement in about 22 states. And it can only be done upon judicial seizure, where the plaintiff has to file a notice with the court along with the complaint.
Unlike a notice of default in a non-judicial foreclosure containing specific information about the default loan, the Lis Pendens typically contains a description of the property and the nature of the claim.
Technically, a property is considered to be in the pre-foreclosure stage from the time the Lis Pendens is filed until it is sold. This is when the foreclosure process takes place. When it comes to the processing time, it will vary by state.
When is Lis Pendens Foreclosure Used?
Actually, Lis Pendens can be filed by anyone at any time, as long as the claim relates specifically to the property. Filling out a Lis Pendens will protect an individual or legal entity’s claim to their property pending the outcome of a lawsuit.
Because Lis Pendens aims to notify the buyer that the property is in dispute and also to prevent someone from selling the property, there are various reasons why someone would file a notice of Lis Pendens.
The following are a few circumstances when Lis Pendens will be used:
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Mortgage Default
When a property owner defaults on their mortgage, the lender may use Lis Pendens to notify the public that the home is in foreclosure. Additionally, other creditors whose debts are secured by the property may also foreclose.
Of course, this is a way for the creditor to prevent the property owner from selling or over-crediting the loan to a third-party buyer.
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Divorce
In the divorce process, there are always disputes, including when the division of real estate property has not been settled.
If one spouse wants a portion of the assets, then they can use Lis Pendens. So, it will make it difficult for the spouse whose name is on the deed to sell the property because it is under pending litigation.
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Challenge to a Will
Lis Pendens will usually be used by one or more heirs to challenge the division of property due to certain conditions, such as an unfair distribution.
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Property Taxes
The tax authorities will use Lis Pendens to seize your property because you failed to pay the property taxes.
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Contract Disputes
Lis Pendens can also be filed in contract disputes. It occurs when a seller or buyer of a property signs a contract to sell a home. But then the seller resells the property to another buyer.
In this case, the first buyer can sue the seller and use Lis Pendens to notify the second buyer that the property is under another contract. If the second buyer has already purchased the property and the court decides that the first buyer is entitled to the property, the second buyer will definitely lose the property, and they should go to the seller to get their money back.
Okay, those are some of the conditions when Lis Pendens can be used.
Filing a Lis Pendens Foreclosure: Here’s How!
If you disagree with the sale of a property, you can file a Lis Pendens, as long as the lawsuit is ongoing and actually involves real property, such as land and buildings.
Even though Lis Pendens works as notice informing the public that there is a dispute over the property, the requirements to file Lis Pendens can vary from one state to another. So, it’s best for you to check it yourself regarding that.
Generally, there are two steps you can take to file a Lis Pendens, including:
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- First, you must file a lawsuit with the county clerk, and the lawsuit should be in process.
- Second, the Lis Pendens should be recorded in the local land records and attached to the property’s certificate.
It’s important to note that one mistake or error in filing a Lis Pendens can cause the document to be removed.
To find out what the requirements are and how to file, you should contact a real estate attorney in your area. However, they can help you understand real estate laws in your area, so you can easily prepare what is needed based on that information.
If you can’t afford an attorney, you can try to find a public assistance program in your area.
Can You Remove Lis Pendens Against You?
Depending on the regulation of your state and the complexity of your case, you can remove Lis Pendens against you. But sometimes, it will be complicated and require a long process.
If you want to remove the Lis Pendens against you, you can try to do a search yourself at the local registrar’s office for free. However, the property title and the Lis Pendens will be recorded at the same institution. If you are having trouble, you can hire a title company, but you may have to pay a fee.
There are three ways that you can take to remove Lis Pendens under the state law, including:
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- Making an agreement. Coming to an agreement with the party who filed the Lis Pendens is the best thing you can do. It will most likely resolve their dispute and withdraw the notice.
- Filling a motion. You can file a motion to remove Lis Pendens in court if the person filing it does not have a valid claim to the property.
- Posting a bond. Last, you can compensate the party filing a Lis Pendens—it could be money or collateral—to have the Lis Pendens notice removed. You can do it by providing a bond to the court that covers the amount claimed. Usually, the court can decide how much bail should be paid in accordance with the state law, the value of the property, and other factors.
If the court is successful in determining ownership of the property for each party, those ownership rights will be terminated when the property is sold (in the case of a foreclosure action).
How to Avoid Lis Pendens
You can avoid foreclosure because there are federal and state laws that protect your rights. But the rules and timing associated with this will vary from state to state, so foreclosure is not always avoidable.
In the case of late mortgage payments, you can file a petition. And the lender may take the pre-foreclosure loss mitigation option. Some mitigation options may work in your favor since they will usually keep you in your home with a new payment path, including payment plans, deferrals, and loan modifications.
Even though a few options require you to surrender your property, they can help you avoid a foreclosure sale, such as the deed in lieu of foreclosure, through a short sale or sale of the home on the market.
Other final options to avoid Lis Pendens foreclosure include refinancing with a third-party lender, reclaiming your property during the redemption period, or filing for bankruptcy.
To note: A foreclosure that your property foreclosure will remain on your credit report for seven years. While some loss mitigation options can protect your credit score, they can really hurt your score.