IRS Tax Lien/Short Sale
ok...I have a "motivated" seller w/ a first a second and a tax lien. the first and the second are willing to work with me on a SS...but I am not sure what happens or how to handle the IRS...anyone out there know?
Thanks for your help.... 
Anita
I had a similar experience on a deal earlier this year that ultimately didn't work out. We did, however, contact the IRS agent involved and he didn't reject our proposal outright. The agent wanted certain conditions met (approval of the contract and an appraisal of the property) that we weren't able to meet given the time constraints involved. The lesson for me was that the IRS would be willing to listen to reasonable proposals.
I'm working with thte IRS now. You will have to get it released or staisified. It will be alot easier if the owners pay, such as you give them more at closing and they in turn pay the tax lien. YOu also need a Letter of Authorization from both parties in order to talk to the IRS. I had no luck in them discounting the lien. Just figure you have to pay it, and talk to them and ask what is needed to be done. Don't expect the IRS to be in any rush either, They have a stack of papers and it took 2 weeks for them to get to mine only to tell me it would take 10 more days before they could even give me a payoff with penalties and interest. Good luck.
Tim
Thanks for you help Loscksmith and Tim
...although not very uplifting:-(...lol...if there is a SS being done and there is not going to be ANY equity left over to pay the IRS will they "detach" the lien from the house that is now owned by new owners?....I guess my ? is....if there is NO net profit to the seller and the seller has NO money what happens?!...for instatnce, if it went to the courthouse stairs the IRS wouldn't be getting any payoff then either?!?!....I guess I should call the IRS
Thanks again for your help
The tax lien will stick with the property. federal tax liens are superior to 1st mortgages, so then it becomes the banks problem.
IRS Tax liens are very sticky. I believe they also stick to the owner, and if they are able to buy another house, the lien will attach to that house too, until paid off.
If anyone knows this to be incorrect, please tell me.
I'm working on a short with a 22K IRS lien right now - very temped to not bother.
Since, I posted the IRS tax lien question I have done further DD and will be closing on that particular house this week....I called the IRS and explained the situation...I told the IRS I was a RE broker and had a buyer for the house however, there would not be enough proceeds to cover the lien...the IRS told me to fax them a copy of the HUD 1 and they would release the lien as long as the buyer is not making any profit on the house. Hope this helps...if you want the house you'll have to get creative... <IMG SRC="images/forum/smilies/icon_cool.gif"> ...the lien will not attach to the house but will stay with the person that owes the IRS...
Good Luck <IMG SRC="images/forum/smilies/icon_wink.gif"> [ Edited by RESolutions on Date 09/08/2003 ]
Does anybody know for sure if a house with and IRS lien goes to auction - does the bank have to take responsibility for it?
Also, RESolutions, how long did it take for you to get a waiver/release from the IRS?
(I've got 2 shorts with IRS liens right now, and I'm wondering if they are worth it or not)
Alubeck's statement in his reply was:
"The tax lien will stick with the property. federal tax liens are superior to 1st mortgages, so then it becomes the banks problem."
Not so. Nothing can get ahead of the 1st mortgage holder's lien, and if they foreclose, they'll get either the first dollars bid, or the property...and the IRS lien is then gone from the property.
If there is more bid on the property at the auction, than is owed on the 1st, any overage would go first to the IRS, to the extent of its lien, then any balance after that would go to the buyer/debtor.
But if the IRS lien is not satisfied completely, the balance of same, will remain as a lien against any other property the IRS debtor owns. The IRS debt does of course follow the delinquent tax payer, NOT any property that's foreclosed out from under them.
John,
Thanks for the correction. I assume then that in a short sale situation, the holder of the first note is not going to care about the IRS lien, becuase it will fall off at auction.
In other words, I can't really use it as leverage to get a short.
I guess it will increase the chance that no one will bid on the property and thus they'd be more likely to deal.
Thoughts?
To: Alubeck
My initial call to the IRS prepared them that there was going to be a sale and there would be a need for a release...so by the time they received the HUD 1 and did what they had to do I had no hold up because there was about a week lapse in there. The best thing to do is call your local IRS and tell them what you are doing....they are really not bad to deal with...However, they did want to review the value of the property...so ask them how that would affect the deal...If you are doing a SS there may be other issues and concerns....
Good luck[ Edited by RESolutions on Date 09/10/2003 ]
There have been some incorrect postings in this thread. Let me try to clear them up.
If a home is foreclosed and there is a Federal Tax Lien on the property, it is NOT wiped out at the foreclosure sale.
Property Tax Liens are also NOT wiped out at the Foreclosure sale.
The IRS has a period of 180 days in which to redeem the property.
If the IRS redeems the property, you will only be paid for the cash amount that you paid at the foreclosure sale (any amount for renovations, utilites, other expenses etc. will NOT be reimbursed)
I only know this because when I first started investing many years ago, I bought a 1/2 finished house at a foreclosure sale that had an IRS lien. I sent in my contractors and they worked on the house, it was 90% completed and the IRS decided to exercise it's option for redemption. I was reimbursed for the amount that I paid at the foreclosure sale and nothing more.
Since then I have learned a few things.
It is possible to work out a deal with the IRS prior to the Foreclosure sale. However, you would need to get a lawyer that specializes in this field and it's not cheap.
If you purchase a property at a foreclosure sale that has a Federal Tax Lien, you can go to the IRS and get an "Application Requesting the United States to Release Its Right To Redeem Property Secured By a Federal Tax Lien" Usually they will take a couple grand and you won't have to bite your nails and let the property sit for 180 days.
Hope This Helps,
Mrs. Meltzer
One more thing, Federal Tax Liens are due in Full when a home is sold.
If you are buying a property prior to the foreclosure sale, hiring an EXPERIENCED and KNOWLEDGEABLE (you'll have to search around for one that specializes in this field) lawyer to help negotiate the amount of the Tax Lien is smart money spent.
Be warned, as with most goverment agencies, this can take time, a very long time.
Hope This Helps,
Mrs. Meltzer
MrsMeltzer,
You didnt answer the question of IRS tax liens, IF the bank buys back the property. Does the lien stick here, too? Does it migrate with the owner? Or are you not sure?
A
My partner just purchased a house pre-foreclosure. I am a R.E. Broker/investor. I spoke with the local IRS office myself and they were very accomodating. They requested a HUD 1 and the date of the sale. The lien was released and the closing took place. The lien is still attached to the seller but not the house. The only attorney involved was the closing attorney/settlement agent. As a matter of fact the gentlemen at the IRS asked me if I could get him time to speak at a Realtors meeting to explain to them how simple the process is to sell a home with a lien. Maybe I just have a nice IRS guy in my area?!?! The IRS has since garnished wages from the seller, but that was to be expected.
After reading the posts here I guess I should consider myself lucky on this deal
If the bank gets back the property, it becomes an REO.
REOs are typically given to Real Estate Agents and are sold for a specific price (the amount of the mortgages and liens are now irrelevent) as the mortgages are paid off with the proceeds of the sales price of the home, it is conducted just like a regular home purchase.
Hope This Helps,
Mrs. Meltzer