IRS lean on foreclosed house - IRS not notified.

9 Replies

I put a bid on a foreclosed property and purchased it 4 months ago. What I found post purchase was an IRS tax lien on the property for $22 000. After doing further research, I found out that the IRS had not been notified and given consent, so the tax lien is still there.

The question: What are my options hereon to remove the tax lien?

Go to the title company and ask them. You did get title insurance right? 

I presume your contract said free and clear of all encumbrances so the bank should ultimately be responsible.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

When the IRS has not been properly served notice of an impending foreclosure auction, the IRS lien survives the foreclosure. As @Ned Carey pointed out, this is a matter to be handled by the title insurance company IF there was title insurance AND the IRS lien was not listed as an exception in the title policy. 

If no title insurance coverage, you get to pay the IRS ... whether they will take less is doubtful since they are probably in first position now. 

I assume you bought it at the actual foreclosure auction, not as an REO. If so, this is why we do title searches, and verify who was named/served, before bidding on auction properties.

I saw the word "Foreclosed", past tense, and assumed you bought a bank owned property (REO) However after reading @Wayne Brooks post I notice you said "Bid". 

If you bought it from a bank after they took the property by foreclosure, you likely have some recourse. Read your purchase contract. However if you bought the property at a foreclosure auction, you are probably in deep do do.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

@Ned Carey   out are way if you buy at auction and there is a IRS tax lien  ( semi common) the IRS has a certain amount of time to redeem the property give you back your money plus statuory interst.

I have bought literaly hundreds of court houses step foreclosure auctions and probably 50 to 75 of them had IRS liens I have yet to have the IRS redeem.. but it is a cloud on title.

However usually by the time I am done rehabbing their time sunset and I get title insurance

could be different of course in other states. but that's how it works on the left coast

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Originally posted by @Jida D :

I put a bid on a foreclosed property and purchased it 4 months ago. What I found post purchase was an IRS tax lien on the property for $22 000. After doing further research, I found out that the IRS had not been notified and given consent, so the tax lien is still there.

The question: What are my options hereon to remove the tax lien?

Any specific information on who you placed the bid with/through?

It seems I've made a number of mistakes on this deal. 

I purchased this from the city, post foreclosure, through a bid. I should have gotten a title insurance, as the lien would have shown. I have to verify this information,  but a case can be opened, where the property goes back to the city, the IRS is notified (as well as all other parties, again), and the property is transferred back to me. A long process that I have to understand better before doing anything. If anyone's got a referral for an attorney specialized in Foreclosures, I am all ears.

I may end up paying the IRS bill, but the numbers will still work on this deal, thankfully.

Originally posted by @Jay Hinrichs :

@Ned Carey   out are way if you buy at auction and there is a IRS tax lien  ( semi common) the IRS has a certain amount of time to redeem the property give you back your money plus statuory interst.

...

Jay, the IRS lien does not go away if the IRS is not served proper notice of the impending foreclosure auction.  The OP here in this thread has found the IRS was not given notice. 

The variation among different states would be in the duration of the redemption period; it will be at least 120 days, but it could be longer in states where state law allows for a longer redemption period than that (like I believe MI would have).