27 May 2014
Whether you’re new to real estate or a battle hardened professional, we all know there is an opportunity to make money with distressed property. If you have the skills and/or nerve, you may be able to make money in this sector as an investor, agent, appraiser, lender or some other angle.
Many real estate professionals rely on lis pendens as their first indication that a property is facing foreclosure. The term lis pendens is used frequently, sometimes without a full understanding. This guide should help clear a few things up but is by no means complete. Feel free to add your own thoughts and insight in the comments section.
What is a lis pendens?
Lis pendens is latin in origin, with a very loose translation that means “suit pending,” or pending legal action. When it comes to real property, a lis pendens is often filed by a mortgage lender when a borrower is no longer making payments.
Is this like a 30, 60 or 90 day lateness on a credit report?
Not really. While both deal with late payments, a lis pendens doesn’t inherently tell you how late a borrower is, it just means the borrower is late on their payments.
A 30/60/90 is a credit matter, whereas a lis pendens is a legal matter.
How long does a lender wait before filing a lis pendens?
There’s no set number of months a borrower is late before a lis pendens is filed, it’s up to the individual lender.
Why is a lis pendens so important?
Since a lis pendens is a matter of public record, it’s the first notice to the world that this property may be facing foreclosure. Having this information is useful to a potential buyer since it can either discourage them from purchasing the property, or they can use that information to purchase the property below market value.
What information is made available in a lis pendens?
It depends on the county of city, but you’ll often get the property address, the plaintiff, defendant and date of filing. From there, it’s either up to you to fill in the blanks as far as the details of the property, what it’s worth, who else owns it, if there are other liens on it, etc., or you can subscribe to a third party data source that will do the work for you.
How do I market to lis pendens?
That depends on what you’re trying to do. An investor or wholesaler is going to want to try to get in touch with the owner in an effort to buy the property. A real estate agent will also try to contact the owner, but to list the property or introduce them to a buyer instead. If the amount of the mortgage is more than what the property will sell for, you’ll need to negotiate a short sale with the bank.
What’s a short sale?
In summary, a short sale occurs when a property sells for less than the sum of the mortgage balances on it.
You’ll often need lender approval to complete a short sale.
How does an appraiser benefit from seeing lis pendens?
Here’s one big example: An appraiser will receive an assignment to appraise a property for the purpose of a mortgage. The client (in this case the mortgage lender or appraisal management company) may not know the property is facing foreclosure.
When the appraiser looks up the property in a third party data source, he or she will find this out and be able to share it with their client. This can save their client a great deal of time, money and trouble, making the appraiser look like a hero.
Regardless of your real estate profession, the distressed real estate market has been around for a number of years and has continued to play a significant part in the real estate economy despite every prediction to the contrary. Getting access to this data as an investor, appraiser or agent may prove beneficial to those who want to capitalize on a lis pendens property.
This article was published by Erik Wind, technology entrepreneur and President of GeoData Plus, a real estate data source used by thousands of agents, investors, appraisers and mortgage companies in New York. In 2011, National Mortgage Professional Magazine included Erik in their “40 Most Influential Mortgage Professionals Under 40.” You can connect on Facebook, Twitter and LinkedIn.