How to go about purchasing a home with a $150K IRS Lien?

6 Replies

I spoke to the owner of an abandoned house and she is very motivated to sell.

I am prepared to make her an offer however she informed me if an 150K tax lien from the IRS. 

My question is:

Is there a way to get that removed? I have no interest in paying off the lien.

What is the best way to go about this? What would be your first steps?

I would contact a title company with this question. Usually the tax lien follows the person, not the property, but it may need to be settled to get clear title.

I would get house under contract for a very low price, then see if you can negotiate with the IRS for a few hundred. If the IRS lien is old then you could buy house for a few hundred or as little as possible with a Quit Claim Deed then wait out the IRS lien to expire after 10 years.

Your seller needs to have that lien discharged from the subject property in order to sell it, and even then in all likelihood the IRS takes all the proceeds. There is a process to follow. Note that IRS liens attach to all property of the debtor located in the jurisdiction in which they are recorded.

@John Underwood makes a good point. If the lien is old enough that could certainly change the way you approach things... in these parts that lien would expire 10 years and 1 day from last record date, and if not re-filed you would be in the clear.

IRS liens are subject to Federal law which preempts state law.  While IRS liens do expire after ten years, the IRS has the option of refiling the lien for another ten years.  This refiled lien is now behind all valid existing liens and not an extension of the previous IRS lien.

The IRS has gotten much more competent in evaluating collateral, resulting in a much tougher stance regarding offers to compromise.  The belief that the IRS will accept a few hundred dollars for the removal of a lien in which significant equity exists is based on a fantasy of urban myths or examples in which very unusual circumstances existed.

In most cases, after a long drawn out process, the IRS may accept less than face value of the lien if the property sells for somewhere in the general range of its appraised value.  The amount collected by the IRS will go toward satisfying the debtor's amount owed to the IRS, not eliminating that amount.  So, it is in the property seller's best interest to obtain the highest price possible for the subject property; not just any amount because he won't be collecting any proceeds anyway.

@Don Konipol If the lien expires and then the subject property is transferred to a new owner, and after that occurs the IRS re-files the lien, it doesn't attach to the subject property.

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