Lis Pendens list for Wholesaling?

[Ryan Russell]

I recently obtained a Lis Pendens list for Wholesaling purposes but I am curious if this is a feasible tactic? If not, what type of list would you suggest for wholesaling?

[Bill Gulley]

No, I don't think that's a good tactic, especially for wholesaling.

But to clear up some, lis pendens is notice of legal action, taken or about to be taken, it could also be in connection with a general or specific lien (look those up). 

Generally, the filing does not keep a property title from being transferred or encumbered, but any transfer or encumbrance would then be subject to the outcome of that legal action. State law may void any transaction attempted, depending on what action is pending, such as a criminal proceeding, but civil proceedings may not block a sale or other lien filing, you need to know what the circumstances are.    

Example, if I bought the place and later a lien was filed, I would end up paying that to clear title, or the seller would. This can happen when you have an installment contract such as an unrecorded contract for deed. 

If I were to make a loan and file my deed of trust, my priority of liens would then follow behind the lien filed as notice was given. 

Because of the priority of liens and the cloud on title most lenders refuse to use that property as security and buyers will run away. Because the notice was filed, that proceeding will have priority over any subsequent transaction. 

That might mean my second mortgage becomes a third mortgage......is that a bad thing? Might not be!

If a general lien is sought out of a law suit, say the owner owns a car lot and he's being sued for $8,355.00, and the house has $40,000 in equity, I buy subject to the outcome of that suit allowing $20,000. If we were to escrow $8,355.00 from the sale and the judgment was denied or ended up being $4,000, would I be hurt? No, it could be a good deal.

Same might be true where sate taxes have been assessed, unpaid and the owner is headed to tax court. Could be an auto accident headed to court, it is unknown if the owner will be liable.  

How you may proceed will be subject to state law, rights of priority, escrow or bond might be required, then again contingencies might not be required. 

Clearly the seller or borrower must work with you, you need to be assured of what the matter is and the down side, more due diligence is required. If state law fails to address title during legal actions pending, then the owner is still free to conduct business involving that property. 

But, you can have opportunities as a more savvy investor, not for wholesaling or the weak at heart or the uninformed. Need to find out what the nature of that pending action is, it could be nothing much at all, something you can cure easily. You can also contract and then deal to have that property released from any pending civil action, that would be done prior to settlement!

You'll find this stuff in Real Estate Basics, knowing about different liens and encumbrances puts you in a better position to profit over others.......just say'n! 

Nappy Hew Year :)