IRS Liens

One topic we discussed at our local REIA club last night was federal tax liens. One investor has a house under contract that has a $200K IRS lien. Somewhere in my memory banks from a seminar is a statement that the IRS has a certain period of time to either claim the property and pay off all other liens or to release the lien from the property. Does this ring a bell with anyone? Or did I just dream it?

I believe that the IRS has 120 after the sale to claim the property.
These people could also ‘short sale’ the lien with the IRS if they want the property itself.

LoriK is correct the IRS has 120 days to redeem the property. However, this only applies if the property is purchased in a foreclosure sale. If it was purchased pre-foreclosure the purchaser has inherited the lien unless he has gotten the IRS to agree to release the lien from the property. It is becoming more difficult but not impossible to get the IRS to negotiate the release of lien for a price. It is a rather arduous project to undertake and many time they do not agree to release liens.

We have done this numerous times and have been successful in about 60
% of the cases in getting the lien released for a cash settlement. Like I said they have been taking a harder line lately.

In foreclosures the IRS lien is a beautiful thing. It scares many people away. You do have to wait for the 120 day period before selling or renovating. If the IRS redeems the property, which they almost never do, they would have to repay you for your costs in purchase. They do not have to reimburse costs of improvements.

If you can wait the 4 months of holding time you can often get good deals on properties with large IRS liens.

I phoned the IRS in NY State and the representitive said as long as they were notified by the bank foreclosing the IRS tax lein was removed from the title at the foreclosure auction. Is this accurate?

To my knowledge the IRS lien will remain with the property for 120 after the sale. The IRS can remove but usually will not do so. They actually have 120 days to redeem the property after the sale but unless there is really big equity they do not do so.

IRS liens are really good for scaring unsophisticated investors off of deal at the court house. They can create good opportunities if you are willing to wait for them to fall off. Just don’t do any major repairs until after the 120 days are up.

For those of us not informed, where would we look to determine if there are any IRS liens on a paticular property?

Did anyone reply with how one can identify property with IRS tax liens?

A title search will show the liens.