IRS Lien Clarification - Courthouse Steps Purchase

9 Replies

Hey all,

I am interested in an upcoming auction at the courthouse steps. There is an IRS Lien filed against the owner. I wanted to make sure I understand what that means and was hoping you can help:

IRS Liens recorded on 6/8/11 & 6/24/15 (the one recorded on 6/8/11 is for back taxes all the way back to the tax period ending 12/31/2007) Total Lien of about 130K.

The foreclosure is for a mortgage originated on 4/11/2008, it was re-assigned on 5/2016 and modified on 6/2017.

Some other information:

  • The IRS is not mentioned anywhere in the mortgage complaint or was not named in the suit by the bank's attorneys.
  • I am based in Florida.
  • The home is probably worth 200K (ARV)
  • The foreclosure judgment is at 126K (so there is some meat on the bone)
  • HOA lien ($1500)
  • IRS Lien (130K)

Based on this info, would you agree that the IRS Lien is junior to the mortgage? That it would be wiped at the sale and at that point I would have to deal with the 120 day redemption period? I am okay with waiting on making any improvements during this period if I can get it at a good price. I would get my money back if the IRS did decide to go through with the redemption including any court doc fees etc correct?

Thanks so much for your thoughts!

The only hiccup here is that the irs was not named and Served (provided Notice).  If they had been, it would be as you stated......but since they were Not served, at the least you would have to give them proper notice after the sale to start the 120 day clock. 

Them being not named/served is problematic, as like any other junior lien holder, they have to be named and served to be “wiped out”.

You might have to reopen the foreclosure suit after buying it, amend the foreclosure suit.

Obviously, ask a local RE attorney that deals with title issues. 

@Wayne Brooks Thanks for the clarification! I re-reviewed the complaint and the list of summoned parties just to confirm the IRS was not named. They aren't.

The auction for the property in question is tomorrow so unfortunately, I won't have enough time to perform proper due diligence on this one and will probably pass. I think it could be a great opportunity but there are too many unknowns for me at this point.

This is good to know moving forward. 

@Jay Patel A quick call to a RE attorney should clear it up.  I’d probably still pursue it, worst case may be amending the foreclosure, not a long process.  Best case, just serving the IRS notice may suffice, without having to reopen/amend the suit.

@Wayne Brooks Thanks for the advice. I may pursue it in that case. Say I win this thing,  Would I contact the Plaintiff's Attorney about amending the foreclosure/serving notice to the IRS or would this be a new "case"? 

@Jay Patel No, the foreclosure attorney works for the lender.  You have your own attorney reopen/amend the foreclosure’s not like “starting over”.  Here, it would be 30-45 days max.

@Wayne Brooks Thanks so much for the insight. Any idea if the IRS's 120 day redemption period would still begin on the day the certificate of sale is issued (or does it start when the certificate of title is issued)? Or would it get pushed due to them not being notified?

Originally posted by @Wayne Brooks :

Since they weren’t previously notified, it would be from when they are notified.

BTW @Chad Urbshott probably knows more about the reopening/amending a foreclosure  in FL than I do.

 In this case, you would have to do a "Re-foreclosure" which entails notifying all lienholders missed in the suit.  It can take some time depending how backed up the courts are.  I haven't had to do one in a few years (as I'm on the lending side now), but maybe it's faster with less backlog in the courts.  

And as Wayne states, it may be as simple as notifying the IRS afterwards.  In any event, I would not hesitate to bid on this with that much equity!