Foreclosure Legal Jargon

[Account Closed]

Hi Everyone,

First time poster here.  I am looking at foreclosures in my area.  I recently spoke with the lawyer who is acting as committee for the foreclosing bank on a particular property.  He stated that the property I am looking at is in foreclosure due to an IRS lien.  He told me that generally, when you buy a property with an IRS lien, that, as the subsequent buyer of the property, I would most likely not be held liable for paying any taxes due to the federal government, but he could not "guarantee that."  I would, however, be liable for any municipal taxes or fees due.  I am trying to do my due diligence since I have never done this before.  In the public notice of foreclosure by sale it reads:

"The property is being sold free and clear of the lien(s) being foreclosed, and of all interests subsequent in right to that lien.

The property is being sold subject to:

All taxes due the municipality not foreclosed by this action,

Water and sewer use charges not foreclosed by this action,

All building and zoning regulations of the municipality which affect this property,

All building lines, easements, restrictions and all other matters concerning this property which appear of record,

The rights of any person in possession or occupancy of the property who have not been made parties to this foreclosure action,

The right of the United States of America to redeem the property, if applicable under Federal law,

Any other liens on this property which have not been foreclosed by this action. "

Can someone with experience in purchasing properties where the owner owes money to the IRS steer me in the right direction?  And can someone put the legal jargon into laymen's terms for me?  Any help would be greatly appreciated.

[Scott Morris]

The IRS lien is rather a right of redemption:

The right of the United States of America to redeem the property, if applicable under Federal law

They get 120 days from the date of transfer to redeem the property. That means that if the IRS so chooses they can force you to sell the property to them.  The sale price would be the price you purchased it for plus any taxes or liens you paid.  They will not pay market value nor will they pay for any improvements you made.

I've bought 2 properties at auction that had IRS liens.  In both cases the IRS never redeemed the properties.  I also waited a major portion of the 120 day before I started any improvements.

If you can't sleep some night you can read the IRS code on this:

5.12 Federal Tax Liens

http://www.irs.gov/irm/part5/

And the Redemption part

http://www.irs.gov/irm/part5/irm_05-012-005.html

Regards,

Scott