Liens & Pre-Forclosures

I need some seasoned advice from those of you that have been working on preforeclosure deals for a while … here are the stats:

  • Property FMV: $108m

  • Current Mortgage: $110m

  • Rehab/Estimated work needed: $20m

  • Financing: Hard Money Lender (Seller Financed)

  • 2005 Tax Lien: $700.00

This property is over leveraged, and in need of serious upgrades to bring a 1970s house up to rental par.

Recently another lien showed up on the current owner from 1998. He bought the house in 2003 – so I am assuming that the Federal Tax Lien below would also be a lien put on the current property he now owns.

Lien: Area: Wage & Investment Area/ $25m

  • Therefore, before this property is sold, would this lien need to be satisfied? Even though it was put on the owners wages before he aquired the property?

  • Will this affect my offer price in the short sale?

Howdy NYcat:

The lien will need to be satisfied at least partially. Offer what you feel the property is worth to you and let the lien holders fight amongst themselves. The IRS will usually step aside if there is no equity or get all the proceeds that they can and give a partial release of lien to free up the sale. Here is an example that i did once.

I offered $7500 on a duplex that was owned without a mortgage. The seller had a $500K tax lien and I first thought oh well good luck getting $500K for a $7500 duplex. Then the title company told me that the IRS would get all the proceeds and release the lien on the property and apply the $7500 to what was owed them.

In your example the IRS may get nothing but will still release the lien.