You can sell your house even if there is a pending lawsuit. However, there will be an exception if the lawsuit is attached to the title of the house. In this kind of suit, documents are recorded against the title, making it impossible to hand over a clean title to the buyer.
Such suits normally occur when the ownership of a property is disputed or if somebody has a right to an easement over the property. However, if the suit is unrelated to the title of the property, nothing is stopping you from selling.
If the other party prevails in the suit and obtains a judgment, they can still record a judgment lien on your own real property.
Theoretically, you can sell your house, but the proceeds may be held in escrow until the suit is settled. However, if determined that you had no right to sell the house in the first place, you might be liable for further damages.
As a homeowner, you are allowed to get into a contract with a potential buyer for the sale of the house. However, the claim in the lawsuit will have to be settled before the title changes ownership. But if the house faces foreclosure, the buyer must be okay with the lawsuit’s outcome.
All this means that a homeowner can list the house, but it will not be easy to find a buyer because most potential buyers require financial aid to make such a big purchase. Most financial institutions will not be willing to fund such a project.
You can decide to incorporate a lawsuit resolution into the sale; this means that the buyer and the seller draw up a contract whereby some money is allocated to the payment of the lawsuit.
If the house is undergoing a foreclosure, you need to factor in the bank’s legal fees, which will likely increase.
To file for a lis pendens on someone’s property, you have to prove that you are involved in litigation that concerns the title or the right of possession, use, or enjoyment of the property.
The notice must include the court where the litigation is pending, the names of those involved, and the property description.
It is advisable to include the nature of the case and the case number on the notice of lis pendens. You also need to register the notice of lis pendens with the county clerk in the county where the house is located.
The biggest challenge with lis pendens is that it is not easy to remove, even if you are the one who filed it in the first place. To remove it, you must get a certificate of release from the county clerk, which can be a challenge to property owners and buyers.
Lis pendens remains in effect until both parties come to an amicable resolution to dismiss the litigations. If dismissing it voluntarily is impossible, the notice will remain in effect for 49 days from when the court entered the final order.
If a lis pendens is not mutually dismissed by both parties or contested by either party, It will expire after 6 years unless someone files a notice of extension.
For a lis pendens to be released, a certificate of release issued by the court clerk must be obtained. The certificate must be recorded with the title company.
Sometimes, people record lis pendens wrongfully to try and stop a real estate closing or delay the process. You will follow a different process to remove a wrongfully recorded lis pendens.
You must file a petition with the court supported by an affidavit. The court will issue an order to show cause. Afterward, a hearing will be set to determine if the lis pendens is valid.
If the lis pendens is determined to have been wrongfully recorded, it will be removed, and the winning party will receive compensation for the attorney fees and court costs.
A couple of reasons make the buyer and agent shy away from offers for a house with a lawsuit attached to it.
The buyer might lose the house or its interest in the house if the Lis Pendens—a notice recorded in a house’s chain title designed to help potential buyers find the existence and scope of pending litigation affecting the title—claimant wins the claim. The buyer will buy a property subject to the outcome of the claim.
Not all people will consider a lis pendens as a deal-breaker. Some potential buyers consider a lis pendens as an opportunity for better deals. When a lis pendens is attached to a property, that information immediately goes into public records.
This means that in most cases, potential buyers will start making contact to get the best deals.
The process of selling a house is not an easy task. If a lis pendens is added to it, the process becomes even more challenging because of the added details and legalities.
It is advisable to have a lawyer representing you so that you receive the necessary help required to navigate through all the stages.
The most preferred lawyer is one who has experience with short sales and the overall foreclosure process. They should be able to go before a judge if the need arises and make a strong argument to help you get a favorable judgment.
It is also recommended that you get an experienced real estate agent to help in the sales process and ensure that your best interest is considered. Several real estate investors will start contacting you when a lis pendens is recorded to your house. A reliable agent will assist you in evaluating the offers and choosing the best option.
There are real estate companies and home cash buyer that are willing to take the risk and buy a house with a lis pendens. These companies buy houses in the condition they are in and make the sales process faster and easier.
These home cash buyers buy houses in the condition they are in and make the sales process as easy as possible for the sellers. You can sell your house fast. The main thing to remember when selling a house with a pending lawsuit is to be upfront about the situation and be prepared to negotiate.
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