Mortgage foreclosure, $400,000 in state/federal tax liens

[Nathan Gesner]

We rarely have foreclosures in my area and there's never enough meat on the bones. I finally saw one that looks promising, but it looks less promising now that I've researched it.

ARV is $400,000, house is standing and I've known it for years. It may require cosmetic renovations, but it's in good shape. Mortgage was originally $110,000 recorded in 1996. It's been assigned five times and Owner currently owes $61,215 plus fees.

The bad news is that I discovered 28 liens on the property:

- two of them are collections and would be wiped out

- 13 are federal tax liens against the individuals, with their social security number listed

- The remainder are State tax liens totaling around $40,000

I've been trying to read up on this and can't get a straight answer. The mortgage was recorded in 1996, so do the Federal tax liens get wiped out with a mortgage foreclosure? What about State? If it were just the State liens and mortgage, this property would be well worth the bid. With the Federal liens included, there's more owed than the property is worth.

One more note: the husband died in 2020, his wife died the year before that. Someone's been keeping up with mowing the lawn and the electricity is still on. There is a second house on the property that was probably a rental and appears to still be occupied.

[Jay Hinrichs]

Quote from @Account Closed:

Quote from @Nathan Gesner:

We rarely have foreclosures in my area and there's never enough meat on the bones. I finally saw one that looks promising, but it looks less promising now that I've researched it.

ARV is $400,000, house is standing and I've known it for years. It may require cosmetic renovations, but it's in good shape. Mortgage was originally $110,000 recorded in 1996. It's been assigned five times and Owner currently owes $61,215 plus fees.

The bad news is that I discovered 28 liens on the property:

- two of them are collections and would be wiped out

- 13 are federal tax liens against the individuals, with their social security number listed

- The remainder are State tax liens totaling around $40,000

I've been trying to read up on this and can't get a straight answer. The mortgage was recorded in 1996, so do the Federal tax liens get wiped out with a mortgage foreclosure? What about State? If it were just the State liens and mortgage, this property would be well worth the bid. With the Federal liens included, there's more owed than the property is worth.

One more note: the husband died in 2020, his wife died the year before that. Someone's been keeping up with mowing the lawn and the electricity is still on. There is a second house on the property that was probably a rental and appears to still be occupied.

It's getting late in the day and I missed where you said it had gone through probate and a personal representative has been assigned.

First you have to know when the sale date is.

Locally I do enough business that title reports are free so I don't know how much a title company will charge you, maybe $100 or so but what you need is a Title Report. (Not title insurance at this point)

The report can tell you who has the right to sell and if it has gone though probate.

It could be that it's in a Trust and doesn't need to go through probate. It could be that there are 16 direct decendants entittled to the property and they can't agree on what to do with the property. Who knows? Anything can be happening and you need the title report to figure it out.

Then someone has to contact the lender to find out how much is actually owed for payoff. Title company can guide you on what liens can be released and what ones have to be paid off. 

What I do once I know if probate has been cleared or if I can identify the personal representative and also have a discussion with title, is buy the property Subject To the existing loan, not record the Warrant Deed yet (unless it wipes out all liens, then I go ahead and record).  Or I  then approach the lien holders that have to be dealt with and negotiate them down.

It's work but it's worth it.

 MIke this is a foreclosure and Nathan wants to bid on it at the court house steps.. I think what your describing is a sub too situation or owner contract situation.  

Nathan I have only once in probably 300 plus trustee sales over the years had the IRS even contact me.. I loved it when IRS liens were on the sale it scared folks away.. you just cant clear title until they sunset .. and the one that the irs contacted me on we just had to give them an additional 40k and they went away still a smokin deal.. on the state liens that is a state specific question but like Tom says if they are junior and were notified pretty sure they get removed.