It's the dreaded LP - "Lis Pendens for Short". It's not the LP that the bank files when you are late 3 months on your mortgage payment. It's not a Mechanics Lien. It's the best LP of them ALL. The KING of all LP's. The LP you SLAP on a property when you are in contract on a house and the seller decides not to sell to you because your competition offered the seller more money. And these LP's are even better when the seller cashes your Ernest Money Deposit you gave them. That technically puts you and the seller in full contract 100%.
What the LP does is CLOUD THE TITLE and makes it just about impossible to sell the property to anyone else, which puts a little damper into the plans for the seller and buyer. There is really no Title Company in the world that will insure a property with an LP against it unless it is paid off. Although we are a honest and hardworking company that has a great reputation we are in business to make money - so when sellers goes back on their word and try to play games this is what we do when we have a signed executed contract. It's not for everyone as it costs quite a bit of cash and have to make sure you have an attorney that can get it done the right way. This is why alot of investors stay away from these types of deals-they just tend to say "oh well" or call us to take over. We have three of these going on currently but one from last week that sticks out which inspired me to do a BLOG on this subject:
A newbie investor called me recently (Lets say his name is Julio) and said he had a deal for us in Suffolk County, Long Island NY that he was in contract on. I ran the comps, looked at pics, and so on…I said "Julio, get me into the property for a quick look and we will sign contracts". 5 days pass and a red flag goes up in my head. I knew he was in contract and gave a deposit that was cashed, emails from the seller basically begging to know when they can get the money as she can't even buy soap to wash her hands. Note: When giving Earnest money Deposits make sure you put the address, etc in the Memo line: "Deposit for 123 John Street"
Some email headlines from seller:
- "Can you give me a check and some cash"
- "How long does the check take to clear"
- "I need some time to clean out the house after payment"
- Etc, Etc, Etc
So I knew Julio had a hot lead ready to sell…….so we thought......
I said Julio - "If the seller has not called you back, returned texts, emails, etc then they are shopping around and/or got a better offer. Slap an LP on the property ASAP-like today-now".
Julio said- "Can you guys do this as I am not that experienced in this and money is tight".
Me- "Yes. We will draw up contracts and send over. How much do you want as assignment fee. $$$$$. Done….We are in contract now and in full control of this deal. Everyone is happy.
That very same day an email from sellers attorney comes in explaining how this contract is canceled, deemed Null and Void as my client had no understanding whatsoever in what she had signed and has been under DURESS. Really (LOL), I don’t think so. From her emails, texts she very well knew what is going on. This is a boilerplate email we see on occasion from sellers attorneys that try to pull out of a contract that their seller signs. We know the sellers attorney which means she will not be too happy and has no case at all. I am not sure how far this will go in court as the seller does not have the financial capability but we do and the deal is worth pursuing. The End
To Be Continued……………………………………………………