Coming up in a foreclosure sale soon is a house I would like to buy to live in. A $125,000 house, with $30,000 equity. Here is the problen, the owner has moved out, he has a $30,000 IRS lein, and a $5,000, NC Dept. of Revenue(State income tax) lein.
I understand that the IRS can come in up to 120 days after the sale and take the house. My question is, does this happen often?
Second, will the title always be clouded by these leins? I seriously doubt a bank would make a loan on the property with a clouded title.
My gut says to stay away from this, any ideas?
Disclaimer- I have not dealt with a situation such as this, and of course all situations are different… But I have read
… either on ths forum or another that often IRS liens can be settled for less than 10 cent on the dollar. Find out the contact person and tell them you want to buy the house but the lien is preventing that. I have read that the IRS often imposes these liens as a form of punishment and you might be able to get the whole amount discharged. You never know until you ask.
the buyer can’t “settle” with the IRS; he’s not a party. the lien is on the seller.
If you buy it for 125, the bank will get 95, the IRS will get 30, NC will get 5 and the seller will have to bring 5 to the table to close (plus closing costs and all the usual). If there’s not enough to go around, the seller will still owe the gov’t. the question is whether the gov’t will allow the sale to proceed in that case. I would guess that probably they wouldn’t stop it under the “somethingisbetterthannothing” theory.
This would be a GREAT time for the SELLER to negotiate a deal with IRS and NC, sell the house and let them have whatever proceeds and walk away. you might suggest this to the seller.
Not sure about your state, but here in Texas: If you are buying from the courthouse steps, and the foreclosure is for the first mortgage, the IRS lien will be extinguished - IF and only IF, the mortgage seeds notice to the IRS alerting them of the sale.
If you can determine the IRS has been notified, and you buy the property, the IRS has 120 to redeem the property from you for the amout you paid at auction.
The problem I have had is finding out if the mortgage company actrually notified the IRS.
So, find out if the IRS was notified of the sale, if so, buy it, then wait out the 120 days.
Bighat
Forgot to mention, if the IRS was notified, and they do not redeem - your title will not be clouded.
If you are serious about bidding, call a real estate attorney or title company and ask them.
Bighat