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Old 01-21-2012, 08:39 PM
 
2 posts, read 23,082 times
Reputation: 18

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Hi all. I am trying to purchase a home in Contra Costa county, California that is in default. After I deposited my down payment with the title company they found out that there were IRS tax liens against the property. What options do I have? I really want to buy this house, but I don't want to pay anyone's back taxes.

The seller actually has to come up with $1,000 to close, and the second lien holder (from a home equity loan) is already forgiving close to $80,000 of the $200,000 they were owed, so there is no equity for the IRS to collect - they are just making things worse.

The primary mortgage holder had scheduled the auction for last week but postponed it because we were in escrow. I believe they will try to set the new auction date for a few weeks from now.

As I understand it the IRS tax lien will be in third position if the primary lien holder forecloses, since the IRS lien was placed after the first and second mortgages. Therefore the IRS lien will be removed along with the second mortgage should it go to the courthouse steps. However, the IRS will have a 120 day right of redemption, meaning they may decide to buy the house back from the winner of the auction.

A few questions:
1) Is there anything I can do to get the IRS tax lien cleared? Can I talk with the Taxpayer Advocate and tell them that the IRS is reducing their chances of collecting the taxes due by blocking the sale and making the house worth less?

2) If the seller or I manage to get the IRS tax lien how long does it take before the deed can be transfered to me and I can move in?

3) Can I get my down payment back from the escrow company yet still remain under contract. We got a great price on the house, and we really like it, so I don't want to lose it if they can work it out.

4) If I purchase the house at the auction and the IRS decides to execute their right of redemption will I get anything more than the purchase price? I read somewhere I may get 6% more than the purchase price.

Thanks in advance for any responses.
Ross
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Old 01-21-2012, 08:51 PM
 
Location: Cary, NC
36,134 posts, read 62,928,348 times
Reputation: 35865
http://www.afn.org/~afn05451/fedtax.htm

Check out the federal right of redemption.
Determine if it applies.
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Old 01-21-2012, 09:27 PM
 
175 posts, read 266,410 times
Reputation: 268
I might seriously be mistaken, but I was under the impression that IRS leins do not second to anything, no matter what date of filing.
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Old 01-21-2012, 09:34 PM
 
3,398 posts, read 4,546,471 times
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I came across something like that once. From what I could gather from the listing agent, all things depend on what the IRS decides. It is a branch of the government after all.
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Old 01-21-2012, 09:34 PM
 
Location: southwest TN
8,338 posts, read 15,857,122 times
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Quote:
Originally Posted by thebpseven View Post
I might seriously be mistaken, but I was under the impression that IRS leins do not second to anything, no matter what date of filing.

That's my understanding, also. IRS liens always jump to first place. I would consult an attorney before continuing with this property.
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Old 01-22-2012, 10:36 AM
 
175 posts, read 266,410 times
Reputation: 268
OK, I found something on bankrate.com just searching for irs tax liens on homes:

IRS tax liens on homes

It says basically that it is possible for the IRS to second to a mortgage, but it's a process and it's not guaranteed. It also says that it can be "discharged" (removed as a lien from the home) but that the money is still owed by the homeowner. It seems like the homeowner and banks have some issues to deal with, but that you personally may not have any way to deal with it.

I still say lawyer up. Free legal help in a forum is worth what you pay for it!
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Old 01-22-2012, 11:56 AM
Status: "No deal is simple or easy" (set 28 days ago)
 
Location: Just south of Denver since 1989
11,408 posts, read 30,706,320 times
Reputation: 7910
The owner needs to contact the IRS request the lien to be removed in order to sell the property.

Happens often in short sales.
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Old 01-22-2012, 02:37 PM
 
Location: East of Seattle since 1992, originally from SF Bay Area
33,116 posts, read 60,137,568 times
Reputation: 36598
The good news is that the title company did their job, that's what you are paying them for.

It all goes back to the contract, hopefully you have an opportunity to get out if the seller doesn't satisfy the lien, or you can get out because they failed to disclose it.

It doesn't sound like they are going to be able to pay it if they are in default
and the sale price is not likely to cover all of the debts so I'd walk away. Run
in fact.
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Old 01-22-2012, 03:56 PM
 
Location: Austin
7,205 posts, read 18,947,307 times
Reputation: 9808
The property is already in default, so more than likely, the IRS will remove the lien and continue to follow the person the lien is against. The lien is there so the home owner can't sell without squaring up that debt. The home owner isn't selling. He's in default and the bank is selling... just my interpretation.
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Old 01-23-2012, 10:37 PM
 
2 posts, read 23,082 times
Reputation: 18
Thanks for the replies everyone. The seller is in default and is trying to sell. We were very close to closing until the IRS lien popped up. I spoke to a lawyer who advised me to try to work with the IRS to get the lien removed so we can complete the deal.

The lawyer also confirmed that IRS liens do not take precedence, only state tax liens do. IRS does have the right to redemption, but that is rarely executed.
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