Judgement sale and IRS

11 Replies

Chase (the mortgage holder) took a homeowner to court and got a judgement against them (for what specifically it doesn't say) for more than the loan amount. So they are selling the house at a Sheriffs sale. I am not sure why they just didn't foreclose but maybe it has something to do with the IRS, and everyone else under the sun, being named as a defendant.

I don't know if this is just a cover all bases move or is their an IRS lien out there somewhere.

So how to figure out how much this guy owes the IRS? There is no lien filed by the IRS against the property in the public records. Do IRS liens attach to the property specifically or all assets? How long is the governments right of redemption? What risks are involved?

I'd appreciate anyone with any experience with this chiming in. Thanks.

Texas may be different, but odd that IRS is a named defendant, without any lien in the public records. IRS has 120 days to redeem. IRS liens do attach to everything, not just a specific asset. If this Not a foreclosure action, odd again, verify what their lien position is. If it's from a non mortgage related action, their priority goes by the time line the judgment was entered, here anyway. Check into it, as if it's Not a mortgage foreclosure, they likely aren't in first position. If I remember correctly, Texas is one of those "non disclosure" states where online researching doesn't show everything.

@Wayne Brooks

I did find an IRS lien against the homeowner that attachs to everything, dated 2011. The original mortgage was dated 2009. It was transferred to Chase in 2012 but just last month Chase transferred it to HUD (government insured mortgage?).

I still don't know what Chase has against this guy but from the other parties involved and the fact that he had a small business it looks like it might be a small business loan.

So basically this house is valued at $260K conservatively, there is a $208K mortgage, now owned by HUD, and a $55K IRS lien from 2011 floating around.

Break even propersition at best or can I forget about the IRS lien?

@Robert Steele

The IRS lien is usually irrelevant, if it's inferior. They have the right to redeem, pay you off and take title, for 120 days..but unlikely. But, a 2011 lien was, I assume, Before this FJ being foreclosed was filed...puts it beyond my comfort level knowledge of consequences. So, it looks like this is Not a mtg foreclosure, and their lien priority will be when the FJ was entered? Assuming that $208k mtg has been in default for a while, it may be closer to $250k by now. This looks similar to an HOA auction play....you need a low purchase amount, since you're just buying the rental income stream until the bank/IRS comes knocking, not actually buying the property for a long term.

The judgment could be either to recover a deficiency or to go after the owner on a personal guarantee - both of those would have involved some other loan. Or maybe the residence was pledged as additional collateral. But I suggest you first discover and understand what preceded the judgment.

The numbers don't sound great BTW IMO. Especially if the bank believes they can recover anything from this.

Aren't there some specific instances where the foreclosure would have to be pursued in a judicial manner in your state?

Sometimes IRS liens are only recorded at the Federal Courthouse, not the county courthouse. In big cities that are also the county seat, both courthouses may be in the same town, but not often in the same building. In smaller cities and towns, they usually don't have Federal Courthouses and they Federal Courthouse may cover many different counties and in some cases the entire state.

@Robert Steele

Lender files a notice of default and gets a judgment. Borrower does not satisfy judgment within 30 days, so property that was collateral for defaulted loan is seized and sold at a foreclosure sale in the manner prescribed by the county where the property is located. If there is an IRS lien, the foreclosure sale is subject to the IRS right of redemption within 120 days.

You say the lender got a judgment and now the property has gone to a sheriff sale. This sounds exactly like a foreclosure to me.

Dave NA

All the foreclosures I see here are done by the Deed of Trust trustee at a seperate trustees auction, not through a judgement and writ of execution.

@Wayne Brooks

I wonder why the IRS lien has been hanging around since 2011. Yes I agree about the play. I wasn't going to pay more than $1K and then just see what happens. I was also planning on paying off the existing mortgage. Maybe I can cut some sort of short sale deal? Who knows. But excluding that, and the fees, it may not leave enough equity. Of course then there is the IRS lien hanging over everything.

@Robert Steele in a short sale, or low equity deal, the IRS isn't usually a problem. In short sales, once they the negative equity, they just release it. With little equity, maybe a few K to get it released.

@Robert Steele

AS others have noted the IRS has specific remedies. And one of those is redemption and they need to pay a successor of interest their money back plus statutory interest which has been about 9% for years.

Might this have been a mortgage insurance issue?

Originally posted by @Robert Steele :
Dave NA

All the foreclosures I see here are done by the Deed of Trust trustee at a seperate trustees auction, not through a judgement and writ of execution.

I'm assuming TX is like CA in this regard. Even though you're in a trust deed state, the lender can opt to judicially foreclose on the note instead of going the trustee's sale route, hence the court case (and judgment and sheriff's sale). It doesn't happen very often. But I saw two cases this past month like that here.

If you could see the case file or notes, you may find that the lender got a judgment on the note that was secured by a deed of trust. .

Kristine Marie Poe

could be as simple as an "alonge Note that was lost" and the bene could not produce the original note and chose to go the judicial route.

TX from my understanding is like MS in that its a dual action state. In other words they have the best of both worlds they can do a Trustees sale and get the property quickly then they can sue in chancery court very quickly thereafter for the judgment. I have done this many times in MS with my borrowers that defaulted. It took 90 days for the Trustees sale then 45 days for the court case. 1k for the trustees sale then 1500 for chancery court.

We had to simply provide a Drive by appraisal showing that the borrower left the property and the value is less than what was owed. and we got the deficiency minus the credit bid that was the value of the appraisal.

So real world.. I had a 60k 1st TD with 12% interest and 30% default rate ( very common default rate) plus cost. Borrower bought from nice turn key guy who flaked. Borrower could not manage property and because I was hard money they decided not to pay.. Well by the time my sale got done and you add in default rate retro back to day one.. they owe me 100k. They let the property go to hell and appraisal comes in at 30k... I get the property and a personal judgment in Chancery court for 70k.. then I take it to CA were they live and file a creditor motion and then garnish their wages. Nasty business and its why I am so adamant about how dangerous Turn Key investing in other states is.. And don't be fooled a bank in Texas will do this to a borrower in a heartbeat I have seen it done many times. For me it was our own money we had millions out and we were not going to just let it go.. We still get payments from loans I made in 05 and 06.

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