tax deed sale with irs lien

3 Replies

Hi bp I am looking at a property in florida that is coming up on the tax deed sale, it has a 150,000 irs lien on it. I have done some research and it looks like the irs has 120 days right of redemption after the sale, If they do redeem the property do they pay me back what I have invested? or am I just out everything I paid for the property? Should I avoid the situation entirely? The property is worth about 175,000

I am NOT an attorney and you would certainly have to speak to one who has experience with your local laws regarding IRS tax liens. However, from what I understand, if the IRS tax lien is the ONLY lien on the property and you settle that lien, they would remove that lien from the deed of the property. You would own it "free and clear" since you paid the debt that was placed on the property.

Clearly, if there are other liens besides IRS (mortgage lien, property tax lien, mechanic lien, etc), the purchase would not settle those. I would also take into consideration that the purchase of a property/lien entails a real estate attorney, title company, etc. There would likely be additional fees on top of $150,000 that you would need to cover for the purchase.

$150,000 + fees vs. $175,000 value. To take equity (cash) out of this investment, you would need to sell which also entails additional costs and commissions deducted from your $175,000 value.

@Bart Charkow   If the property is going up for auction at a tax deed sale then we know for certain that the IRS lien is not the only lien on the property.  

@Curtis Ramsay I'm assuming you want to acquire this property at the tax deed sale and NOT pay the IRS tax lien (otherwise this purchase would make no sense). 

It's very rare that the IRS redeems these liens.  However, to answer your question, if they were to do so you would not be out everything you invested.  You would be entitled to be reimbursed for the purchase at the tax deed sale and certain expenses you incurred that were necessary to maintain the property or keep the property safe and intact (i.e. you replaced a broken front door or window). 

On the other hand, you would NOT be entitled to be reimbursed for expenses you incurred to enhance or improve the property (so hold off on putting in those granite countertops until after the lien is cleared).

You can read all about this process here if you're interested in learning more: IRS, Chapter 12. Federal Tax Liens, Section 5. Redemptions