Just a question. I am a first time home buyer and have found that the home that I’m in process of purchasing has a federal tax lien against it for 92,000.
The title company has told us that the lien is against all of the seller’s properties and that they can have it removed as there are multiple properties. They told us that the worst case scenario is that the lien will take more time to remove and may delay our closing.
I’m skeptical and concerned. Is this something that’s possible? Would the IRS remove the lien because they can still claim it on the other properties that the seller owns? If this is the case how long would it typically take to have the IRS remove the lien?
Lien's are common whether it is a mortgage lender in first, second or third position or a mechanics lien placed by a general contractor or sub-contractor or potentially a lien placed by a creditor to secure a judgment or a county, state or federal lien to secure unpaid property taxes or income taxes such as the federal lien you refer to.
A title company can not provide title insurance without providing equitable title, so the lien has to be negotiated by the title company with the lien holder, in this case the title agent speaks with the IRS to negotiate a release of the lien on this property for some portion of the sellers equity.
If the seller has say $50k in equity after closing cost’s the title agent may try to negotiate a portion, say $35k from this property sale which will go to the federal IRS lien in exchange for the release of lien on this property, this does not mean the seller does not owe more money for tax liens but this property will be released so you the new buyer have equitable clear title.
So as a buyer don’t worry about the lien provided this deal is being done through a escrow / title company and you are receiving title insurance guaranteeing you equitable title, this is strictly a seller problem. Now if this was a cheap fixer upper and your inclined to except a warranty deed then you need to check for liens before you except the deal as you could end up inheriting a real problem.
Since this is a title company doing escrow it is not a problem either lien is released or title company won’t provide title insurance and this deal won’t close!
For someone as a first-time buyer, you surely gone through mistakes and stressful experience. Often, times we learn the hard way by making wrong decisions. To avoid these, always think and ask yourself if you are ready to commit for long-term payables or putting the money into a full home investment. Also keep in mind about property taxes and insurance because it has the tendency to increase every year.
A tax lien means the owner of the property has not paid any type of tax, so the government entity has filed a lien against the taxpayer’s property. So as you buy a home with lein that you might not be able to obtain title insurance on the house.