Understanding Appraisal Clauses, Counteroffers, and Lis Pendens in Real Estate Deals
Introduction
Real estate contracts often include terms that adjust the price based on an appraisal or impose legal notices that cloud title. Understanding how these mechanisms work can prevent costly surprises.
Appraisal clauses and counteroffers
An appraisal clause allows the purchase price to adjust downward if the appraisal comes in lower than the offer. However, once a seller makes a counteroffer, that counteroffer replaces the original offer. In other words, a counteroffer is a rejection of the original terms and creates a new contract; only the terms in the counteroffer survive. If you change the price, you should list all other terms you want to keep, because the prior offer is gone (www.justanswer.com). This is why it’s critical to state a fixed price in the counteroffer if that is what you intend, and to make sure there is no ambiguity about whether an appraisal contingency still applies.
What is a lis pendens?
A lis pendens is an official public notice that a lawsuit involving a property has been filed. It puts would‑be purchasers on notice that the title is in dispute. Because a lis pendens is recorded with the county, it effectively clouds the property’s title and makes it extremely difficult to sell or refinance until the litigation is resolved (clarkcountybar.org). As Investopedia explains, a lis pendens can only be filed if the claim relates specifically to the property, and it warns buyers that ownership of the property is in dispute (www.investopedia.com). The notice remains in place until the lawsuit concludes, which can deter buyers for months or even years.
Protecting yourself as a seller
- Make sure your counteroffer clearly states all changes and includes every term you intend to keep.
- Consult a qualified real‑estate attorney before agreeing to price adjustment clauses. If you don’t want the price to be subject to appraisal, strike that clause from the final contract.
- Understand that a buyer can file a lis pendens to preserve their claim, which will cloud your title and make the property hard to sell. If a lis pendens is recorded against your property, speak with your attorney about filing a motion to expunge it if the underlying claim is weak.
- Avoid verbal agreements; ensure all terms are documented in the written contract.
Conclusion
Real estate negotiations often involve back‑and‑forth offers and legal tools like appraisal clauses and lis pendens. Knowing that a counteroffer supersedes the original offer and that a lis pendens can stall a sale helps sellers protect their interests. When in doubt, get professional advice and insist on clarity in every term of your contract.