I would like to check myself whether a house has an IRS lien and what the amount is. Can I check this myself online? Where? How?
Hi,
Any real estate data feed company that provides full property profiles will have lien information if it's filed and recorded against the property! Keep in mind less than 1 in 100 properties will have a IRS tax lien against them!
GR
Which real estate data feed company would you recommend online? How much per property should I reasonably pay to get the title search report to see all liens?
www.tax-sale.info/ for one.
google " The county where the property is" county clerk office. Many counties allow you to search public records online.
You can purchase tax liens online if you’re unable to join county tax lien auction. Since you are bidding online, most of the counties require you to register weeks or days prior to the sale. After registering, you can then bid online. Just prepare your self pay deposits and registration fees for some state require this to their online bidders. Colorado, Arizona, Florida, Maryland, and Indiana conduct tax lien sales online.
While I always check to see if there is an IRS lien on a tax lien property, it is not a reason why I would not purchase one. Under federal law, the IRS has 120 days to “redeem” any lien bought at a public auction. This is from the date of auction.
IANAL, but in order to “redeem” a property, the IRS must pay the actual amount paid for by the lien holder plus an interest rate of 6% from the date of the auction. In addition, the IRS would have to pay for any expenses over any income you received on the property. While the IRS liens rides with the property until this time, it does not whip yours out. The IRS must buy you out within 120 days.
The risk I see is if you have bid down a lien to 10% and the IRS buys you out at 6%. So you lose a potential 4% of interest.
Tg
From Section 7425(d), USC Title 26, Internal Revenue Service Code:
i Redemption by United States
(1) Right to redeem
In the case of a sale of real property to which subsection (b) applies to satisfy a lien prior to that of the United States, the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer.
(2) Amount to be paid In any case in which the United States redeems real property pursuant to paragraph (1), the amount to be paid for such property shall be the amount prescribed by subsection (d) of section 2410 of title 28 of the United States Code.
(3) Certificate of redemption
(A) In general In any case in which real property is redeemed by the United States pursuant to this subsection, the Secretary shall apply to the officer designated by local law, if any, for the documents necessary to evidence the fact of redemption and to record title to such property in the name of the United States. If no such officer is designated by local law or if such officer fails to issue such documents, the Secretary shall execute a certificate of redemption therefor.
(B) Filing
The Secretary shall, without delay, cause such documents or certificate to be duly recorded in the proper registry of deeds. If the State in which the real property redeemed by the United States is situated has not by law designated an office in which such certificate may be recorded, the Secretary shall file such certificate in the office of the clerk of the United States district court for the judicial district in which such property is situated.
(C) Effect
A certificate of redemption executed by the Secretary shall constitute prima facie evidence of the regularity of such redemption and shall, when recorded, transfer to the United States all the rights, title, and interest in and to such property acquired by the person from whom the United States redeems such property by virtue of the sale of such property.[/i]
And from Section 7410(d), USC Title 28, Internal Revenue Service Code:
i In any case in which the United States redeems real property under this section or section 7425 of the Internal Revenue Code of 1986, the amount to be paid for such property shall be the sum of—
(1) the actual amount paid by the purchaser at such sale (which, in the case of a purchaser who is the holder of the lien being foreclosed, shall include the amount of the obligation secured by such lien to the extent satisfied by reason of such sale),
(2) interest on the amount paid (as determined under paragraph (1)) at 6 percent per annum from the date of such sale, and
(3) the amount (if any) equal to the excess of
(A) the expenses necessarily incurred in connection with such property, over
(B) the income from such property plus (to the extent such property is used by the purchaser) a reasonable rental value of such property. [/i]
Reason for Modification: Replaced “lien” for “lien/deed” - not sure if this applies to tax deed properties as well - can someone help me here?
Hi,
I like TGAUCHSIN's posting below, this is exactly why you only have 120 days to act, if you buy a property in any real property tax lien sale, and lets say you spend $5k for the property through the state, if there is also a Federal IRS Lien on the ptroperty for say $10k and the property is actually worth $40k as is and $125k rehabbed, you either act and volunteer to pay the outstanding IRS lien or risk the IRS coming in and redeeming the property!
This is the motivation for potential investors acquiring property through Tax Sales to turn around and pay the original owners IRS lien to clear title, if you don’t you quite possible went through the motions of purchase for nothing! The IRS will generally wait until the very last minute to decide to redeem the property!
The IRS owes you nothing for rehab, repairs, carrying cost’s or utilities while you hold the property, the only thing they owe if they decide to redeem is the principle plus six percent!
GR
Thanks for the info GR. While I don’t see the risk/reward of an IRS lien on a tax lien property as being of great concern, I can where this could be a deal breaker on a tax deed. It could also be a problem if I had to foreclose on a tax lien.
Tgauchsin
I was under the understanding that a tax lien has priority over all other liens a property has. I have a Certificate of Purchase on a property that has a lien for Fed. unpaid taxes and a lien for unpaid child support. I have not jet started the foreclosing process (30 day notice etc). Since it is risky to end up with these properties with these type of liens. what can I do now? Will I get my money back for the certificate of purchase, or do I proceed with the foreclosure.
Thank-you for any helpful comments
Hi,
A state tax lien (or lien certificate) trumps all Trust Deeds on the property! (Mortgage Lenders) A state tax lien may trump a child support lien depending on the filing dates of each lien, the lien amount and the as is value of the property. They are both state liens so consult an attorney as to ability to make a motion to vacate the child support lien order on the grounds of value and time line may be possible. (You bought your tax lien certificate in good faith from the state and no child support lien existed at the time.)
The Federal Tax lien will stand and if your lien is for a dollar and the property is only worth a dollar and a penny they are unlikely to come after the property (They have 120 days to redeem you once you foreclose), however if your tax lien is for a dollar and the property is worth ten dollars as is, it is likely the IRS will come after the property and redeem you for your lien amount and 6% interest!
Your attorney may be able to aproach the IRS and negotiate a settlement upfront so you have a known quantity, however they are unlikely to budge if your profits far exceed thier lien!
On the other hand and I have done this many times you have a tax lien certificate for $5k, foreclosure cost’s you $3k and the IRS lien is for $10k, but the property is worth $60k as is, I write a check to the IRS as fast as I can and pay the IRS lien!!
Having $18k in a property worth $60k is a great deal for the property as an investor!
GR