IRS Tax Lien and HOA Foreclosure

[Hal Thompson]

I am considering purchasing an hoa foreclosure where the original owner is deceased, and the HOA is foreclosing on his estate for lack of payment of dues. There are no known heirs of the deceased and, as far as I know, the estate has not been through probate. There are no outstanding mortgages on the property.

I talked to the management company for the HOA, and they tell me that the only outstanding obligation they are aware of is a letter from the IRS notifying them of the possibility of a lien. I am worried I am dealing with a situation like this one:

http://www.kboi2.com/news/local/94483204.html

Apparently the IRS can have an unrecorded lien against a debtor's estate and it has priority even though it has not been recorded. I tried calling the IRS, but without a letter from the debtor or his heirs (who are unknown), it seems like they probably won't talk to me.

Anyone have experience with this issue? What is the likelihood the IRS will foreclose their tax lien? How can I figure out the amount of the lien? Should I just pass on this one because there are too many unknowns?

[Rick H.]

Uh, I may have confused you. 

For starters, you need to understand title laws in the state that you are working. Here's how it works in my state, CA.

A LIEN in favor of the IRS, which is a general debt against the taxpayers assets, won't prevent a tax sale from occurring, however since debts to the United States are superior to all other claimants' interests, the IRS's 120 day right of  redemption prevails. 

They rarely pursue their claims. So, you can acquire MOST properties subject to an IRS lien that was in junior position and just wait out the 120 day ROR.

Other liens are different. Involuntary liens like judgment liens and state tax liens, being general debts, remain as a debt to the debtor, even though the property was sold via tax deed sale or other forced liquidation (ie foreclosure or sheriff sale) on a superior debt. 

Although voluntary liens such as mortgages and trust deeds securing debts get wiped OFF, the debts may or may not survive, depending on the type, nature and state. 

Does this help or confuse you more?

Real estate title laws can be complex, even for a single given state. I encourage you to invest some of your capital into title research education from LORMAN or some other legal trainer.