Seller has IRS liens, need advice on how to get partial release

15 Replies

Happy Monday BP!

I've been working with a seller that is trying to sell 3 houses that are part of his father's estate. The IRS has a lien against his father's estate in the amount of $330k, and I have a contract with the seller to buy all 3 houses for $120k.  The seller and my title company have been trying to get a partial release of lien for the 3 houses so that they can be sold, but we haven't been able to make any progress. The seller is also aware that 100% of the proceeds of the sale will have to go to the IRS to pay down the $330k lien of his father's estate. The IRS has been very unhelpful and unresponsive, so I thought I'd see if anybody here has encountered this situation before, and what channels they went through to get the ball rolling and resolve it.

Thanks in advance!

@Jason McDougall are you even sure the IRS will do partial releases? I bought a property last year from a couple with a $500,000 IRS lien and it took them three weeks to process my request for a full lien release after I paid them $500,000. They wouldn't even return my calls up until that point. Good luck trying to get them to do anything else. Let me know if you have any success and what you had to do to get it!

@Jason Hirko I'm not sure that the IRS will do a partial release, I just assumed that they would want some money from the sale of the houses. As it stands, they won't get anything if the seller isn't able to sell them. I'll keep you updated!

Jason McDougall:

What you need to do, although it is very difficult, is stay out of the problem.  I ran a Title Company for 20 years in Texas, and I can tell you this: the IRS will deal with two people, and only two people, the legal representative of the father's estate (not the heirs, the legal representative), and the Closer for the Title Company.  No one else will be getting a reply from the IRS.  So, your best bet is to sit down and talk to the Closer at the Title Company and ask if there is anything you can do to help them.  You can also talk to the representative of the estate and ask them if there is anything you can do to help.  I have been through this a number of times, and I also worked for the IRS, and I have never seen anyone other than the taxpayer, the taxpayer's representative, or a licensed escrow or fiduciary agency handling a transfer, get a tax lien released.

But it looks like you could make the situation work for you.  Ask the Title Company who has the authority to transfer title to the property.  Then get that person to accept $ for an option to purchase at your 120K price.  That puts you first in line if this is ever cleared up.  Alternatively, talk to that person about a Lease/Purchase situation.  You could end up controlling the properties for years.  In my experience, the IRS is not going to do anything with the tax lien except keep renewing it every ten years.

It looks like a good deal. Work it!

@Account Closed

Thanks for the advice. I'm not attempting to contact the IRS on behalf of anybody, but the seller that I'm working with asked me to help him find out how to get the ball rolling. If there's an office, representative, or phone number I can direct him to, that's really what I'm looking for. He hasn't received any kind of response to his requests.

Now we have determined why the IRS is not responsive.  Under Texas law, at the moment of the taxpayer's death, ownership of this property vested in "The Estate of _____."  The children are not the owners.  They might someday be the owners, they might not.  But look at it from the point of view of the IRS.  Someone contacts them saying they are the son of a taxpayer, the taxpayer is deceased, and they want to talk about releasing a tax lien.  Even if this is true, and it often is, the IRS is prohibited by law from responding to that.  That is why they have been unresponsive.

In order to get the ball rolling here, assuming there is a Will leaving everything to the son who is trying to sell the property, the son must hire an Attorney to file the estate for probate, and obtain Letters Testamentary naming the son (if he is so named in the Will) as the representative of the estate.  The Attorney will then contact the IRS as the legal representative of the son, enclose copies of all documents, and request an exact payoff of the tax lien, and ask if the IRS is willing to accept the net sales proceeds of the sale of the property and release the property from the lien.  I guarantee you that the IRS will respond.  The attorney should then take the response to the Closer for the Title Company, and you are on your way.

This is the way it works.

I hope this helps.  Let me know if you have any follow-up questions.

Michael Lantrip

You're welcome.  Stick with it, I've done deals like this, and what with dealing with the IRS and the family, it's like herding cats, the end result is worth it.  And I really don't see a downside.

Michael Lantrip

Get the seller to submit an Offer and Compromise, you can close with those in Ca. Make sure you can in your state. It is like as partial release but you pay a negotiated amount to make it go away forever. :)

I saw this done with a mechanics lien, in CA so I don't know if it applies. The title company "bonded around" the defect in title, that the property could go thru forclosure and be sold.

As much as I hate attorneys, I have to say your better off getting an attorney or CPA who has experience with real estate. We buy notes that have IRS liens. The borrower is usually unavailable & uncooperative. We don't have a problem getting the lien released. However, we are not dealing with a deceased person. 

@Andres Diego I had to get formal appraisals done on the properties and then I had to submit those along with the purchase agreements to the IRS. The purchase price couldn't be lower than the appraised amount. The IRS took a while, but they eventually approved the sale.