You could contact a Real Estate Attorney to clean up the title.
If the judgment is currently a valid lien against the property*, the judgment itself should have all the info you need. Creditor name, date entered, amount, attorneys fees if any, interest... you would reach out to the creditor for a written payoff statement and release (once paid).
*judgments expire, not all judgments attach, etc.
Get the abstract of judgment and either work towards settling it if possible or obtain a payoff to have it paid through escrow.
Related question here. I just found out that the owner of a house, which is currently in the foreclosure auction process, has a sizeable IRS judgement against him. If I were to acquire this property at the auction, am I inheriting a huge title and/or judgement mess? I know any seller profits from a sale can be taken to satisfy a judgement, but this person would be losing the house to foreclosure and thus there is no money to take.
Thanks for the your knowledge.
As a retired IRS worked, I've seen this scenario many times. You will need to get the IRS to issue a discharge of it's lien otherwise it will follow the property (unless the lien has expired- check the local recording agency and look at the dates) Check IRS.gov under discharges of Notice of Federal Tax Lien. This process can take some time.
@Colin Perry Is it a short sale you are trying to buy on auction.com? If so, the IRS lien would need to be released prior to closing. Typically on short sales the IRS will issue a partial lien release.
In a foreclosure auction, assuming the irs was named/served, the irs has the right to redeem, repay you your purchase price, for 120 days.....after this their lien goes away.
@Karen Thomson thank you.
@Brett Goldsmith I'd be acquiring the property via a trustee foreclosure. More info, the deed of trust was recorded before the IRS lien. An attorney with a title company told me the following:
"When I insure properties post-foreclosure that involve IRS liens the first question is was the lien filed before or after the DOT was recorded. If filed before the DOT the lien survives foreclosure. If filed after the DOT then the lien is junior in priority and is wiped out by foreclosure provided the IRS gets at least 25 days note of the sale. If IRS doesn't get proper notice the lien is undisturbed and remains a lien on the property.
The other thing to keep in mind is that even if the IRS is given proper notice they maintain a 120-day right of redemption. If they do redeem they will pay the purchaser at foreclosure the high bid amount, and some costs. Practically speaking that means if property is being purchased to rehab and flip a risk is being taken if improvements are made before the 120-day redemption period expires."
That jives with what @Wayne Brooks says (thank you Wayne!).
The question I'll be trying to answer tomorrow is this -- if my purchase price at auction is higher than what the lender and IRS are cumulatively owed, does the additional money above making the lender whole go towards satisfying the IRS lien -- thus putting out that red flag fire either way?
"IRS gets at least 25 days note of the sale. If IRS doesn't get proper notice the lien is undisturbed and remains a lien on the property"
Here is an example of what may happen, if the proper notice is NOT given
My experience is the foreclosing trustee's office will not let you know if a proper notice is given or not unless you contact them through an attorney.
@Colin Perry If your purchase price covers the 1st lien and 2nd lien ( IRS lien ) they would be paid in full. Any leftover funds go to the 3rd position and if there isn't one then this could be a surplus funds claim for the owner.
@Brett Goldsmith thanks that is what is logical to me, thanks for confirming. Full title search will be complete tomorrow so I'll know if there are any more liens to cover.
@Sal Castaneda about $110k. Lender is owed $135k. To get this, if I can get it, I'd be paying more than those combined debts/liens, so hopefully the only ball they'll play is settling up from the excess foreclosure funds. I'll find out tomorrow if there are more liens. If not, does that sound right to you, IRS would be made whole thru the excess funds thus that problem has a light at the end of the tunnel?
That puts you at 245k, what is the ARV for the property???
Hey @Sal Castaneda , sorry to just be getting back to BP after a hiatus. The ARV was $510k. Someone else came in and bought this directly from the owner subject to the tax lien a few days before the auction ended. Maybe that was the best thing for me, maybe not. I'll see what happens with the lady who bought it. Will be interesting. Thanks for your response and again sorry for my delayed one.
"Someone else came in and bought this directly from the owner"
Did someone buy during the upset bid period? I do not believe once it is in the FC process (upset bid period), you can directly deal with the owner.
@Account Closed yes that is what happened. Didn’t think that could happen myself.