Federal Tax Lien on Auction Property

Member since 2018 · 55 posts · 16 votes

I am looking at purchasing a house via online auction. It states the seller will "pay delinquent property taxes and any delinquent HOA assessments in accordance with the applicable Purchase Sale Agreement."

It also had a title report for bidders to review. The property had mortgage recorded in 2009 and has a senior 90k federal tax lien from 9/7/2010--- per this clip from the IRS website, and it being over 10 years, would that mean I'm safe?! This is a first for me (buying online auction). I may take title report to title company for them to review and advise. (I have NOT placed a bid yet- still completing due diligence).

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Kyle J.

Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes

@Leslie Crosten You wouldn't have to pay the $90k, if that's what you're concerned about. The IRS has 120 calendar days from the date of the foreclosure sale to exercise their right of redemption. It's very rare they do.

On the off chance they did proceed with redemption, they'd have to reimburse you for your purchase price, plus interest, and other allowable expenses.

Here's some "light" reading if you want to learn more about this subject directly from the source (IRS):

IRS: Federal Tax Liens - Redemptions

IRS: Legal Reference Guide for Revenue Officers - Federal Tax Liens

IRS: Guidelines for Processing Notice of Federal Tax Lien Documents

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Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
Go ask your title person what'll take to remove that lien. Easy and quickest way.
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Leslie Crosten
OP
Member since 2018 · 55 posts · 16 votes
6y
@Steve Morris I did just speak to her and was told this is a “lawyer question” regarding if the federal lien would be removed since 10 years has passed.
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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y
Federal tax liens stay on foreclosure auctions but it should be paid off at closing on the types of auctions you would see at Auction.com or HUBZU. Ask a title agent what's going on.
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
@Leslie Crosten You wouldn't have to pay the $90k, if that's what you're concerned about. The IRS has 120 calendar days from the date of the foreclosure sale to exercise their right of redemption. It's very rare they do.
On the off chance they did proceed with redemption, they'd have to reimburse you for your purchase price, plus interest, and other allowable expenses.
Here's some "light" reading if you want to learn more about this subject directly from the source (IRS):
IRS: Federal Tax Liens - Redemptions
IRS: Legal Reference Guide for Revenue Officers - Federal Tax Liens
IRS: Guidelines for Processing Notice of Federal Tax Lien Documents
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y
@Andrew Syrios thanks for your response. Spoke to one title company who suggested a speak to a lawyer. Have pending calls to another title company and real estate attorney. It is a foreclosure auction on a broker’s site. Not Auction.com or HUBZU. But Im more intrigued because it is over 10 years old... so much information out there on this so it’s kind of overload and wanting to know which is factual/most recent.
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y
@Kyle J. thanks! I’ve read a lot of that, too, including the 120 day deal. But I was wondering if that would not even apply because the lien is more than 10 years old?
If it is still active and true that IRS has 120 days to come for the 90k, I would then not want to start any rehab on the property during this time, as that is money I would not be reimbursed by the IRS. Correct?

(Asked before reading all of the links you sent haha) going to read more from those links now! Thank you.
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Bob Floss II
Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
6y
@Leslie Crosten An attorney or title company can review the foreclosure case.
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y
@Kyle J.
Would make me think the time has passed since it’s been >10 years. Or how would I be able to know if an extension had been filed?
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y

@Bob Floss II thank you. I would also then wonder about the remaining junior liens... most are smaller amounts for several hundred dollars to a couple thousand. But there is this “construction lien” for $14,800... how do these usually work?
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
Originally posted by @Leslie Crosten:
@Kyle J. thanks! I’ve read a lot of that, too, including the 120 day deal. But I was wondering if that would not even apply because the lien is more than 10 years old?
If it is still active and true that IRS has 120 days to come for the 90k, I would then not want to start any rehab on the property during this time, as that is money I would not be reimbursed by the IRS. Correct?
(Asked before reading all of the links you sent haha) going to read more from those links now! Thank you.

You're correct that the IRS would not reimburse you for any costs of remodeling/improvements. (Basically the expenses you can get reimbursed for are those necessary to "maintain" the property.)

As for the 10-year limit, the third link I included in my previous post talks about that and the various conditions under which it can/will expire (i.e. 10 years from the date the liability was assessed plus 30 days, if not refiled).

I know, lots of reading to do. :)
Best of luck.
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y
@Kyle J. Thanks!! any idea how I would be able to tell if it was refiled?
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
Originally posted by @Leslie Crosten:
@Kyle J. Thanks!! any idea how I would be able to tell if it was refiled?

A title report is where I would look for it.
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y
@Kyle J. update! Got ahold of someone from Secretary of State office and determined there has been a release filed on that federal tax lien! Wonderful news. And also received some other very helpful information.
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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y
Originally posted by @Leslie Crosten:
@Andrew Syrios thanks for your response. Spoke to one title company who suggested a speak to a lawyer. Have pending calls to another title company and real estate attorney. It is a foreclosure auction on a broker’s site. Not Auction.com or HUBZU. But Im more intrigued because it is over 10 years old... so much information out there on this so it’s kind of overload and wanting to know which is factual/most recent.

OK, if it's a foreclosure auction, then in all likelihood, the lien will remain after the sale. But yeah, it would be worth talking to a lawyer.
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Leslie Crosten
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Member since 2018 · 55 posts · 16 votes
6y
@Andrew Syrios updated thread in my last comment! 👍🏼
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Ron S.
Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
6y
Originally posted by @Andrew Syrios:
Federal tax liens stay on foreclosure auctions but it should be paid off at closing on the types of auctions you would see at Auction.com or HUBZU. Ask a title agent what's going on.

I disagree. Federal tax liens sunset after 120 days if not exercised, or sooner by request and approval from the IRS.
2 Reply
Ron S.
Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
6y
Originally posted by @Leslie Crosten:
@Kyle J. thanks! I’ve read a lot of that, too, including the 120 day deal. But I was wondering if that would not even apply because the lien is more than 10 years old?
If it is still active and true that IRS has 120 days to come for the 90k, I would then not want to start any rehab on the property during this time, as that is money I would not be reimbursed by the IRS. Correct?

(Asked before reading all of the links you sent haha) going to read more from those links now! Thank you.
- 10 years is assuming they did not extend the lien. They can.
- 120 days can be earlier with written request. Very common.
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y
Originally posted by @Ron S.:
Originally posted by @Andrew Syrios:
Federal tax liens stay on foreclosure auctions but it should be paid off at closing on the types of auctions you would see at Auction.com or HUBZU. Ask a title agent what's going on.

I disagree. Federal tax liens sunset after 120 days if not exercised, or sooner by request and approval from the IRS.

Isn't that 120 days to redeem after the foreclosure auction?
Podcast Guest on Show #121
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Ron S.
Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
6y
Originally posted by @Andrew Syrios:
Originally posted by @Ron S.:
Originally posted by @Andrew Syrios:
Federal tax liens stay on foreclosure auctions but it should be paid off at closing on the types of auctions you would see at Auction.com or HUBZU. Ask a title agent what's going on.

I disagree. Federal tax liens sunset after 120 days if not exercised, or sooner by request and approval from the IRS.

Isn't that 120 days to redeem after the foreclosure auction?

yes...after the sale.
1 Reply
Terry Matthews
Rental Property Investor · Owensboro, KY · Member since 2020 · 20 posts · 14 votes
6y
@Leslie Crosten I would definitely get title insurance
1 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
6y
Just for the record, if I'm reading the original question correctly, the IRS had a senior lien, one which has/had priority over the mortgage being foreclosed. If that's the case the IRS lien is not extinguished by the foreclosure and therefore the 120 right of redemption does not come into play. The IRS still has a lien on the property for the full amount owed and can bring it's own action to foreclose its lien. However in this case it sounds like the lien has been released so the question is moot.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Peter Walther:
Just for the record, if I'm reading the original question correctly, the IRS had a senior lien, one which has/had priority over the mortgage being foreclosed. If that's the case the IRS lien is not extinguished by the foreclosure and therefore the 120 right of redemption does not come into play. The IRS still has a lien on the property for the full amount owed and can bring it's own action to foreclose its lien. However in this case it sounds like the lien has been released so the question is moot.
yes foreclosing a junior lien does not remove a senior lien not matter what it is.. although in practice its pretty rare to have IRS lien senior to bank loans.. maybe a private loan where a lender never requested lenders title insurance.

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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y
Originally posted by @Ron S.:
Originally posted by @Leslie Crosten:
@Kyle J. thanks! I’ve read a lot of that, too, including the 120 day deal. But I was wondering if that would not even apply because the lien is more than 10 years old?
If it is still active and true that IRS has 120 days to come for the 90k, I would then not want to start any rehab on the property during this time, as that is money I would not be reimbursed by the IRS. Correct?

(Asked before reading all of the links you sent haha) going to read more from those links now! Thank you.

10 years is assuming they did not extend the lien. They can.
120 days can be earlier with written request. Very common.
That was my impression. So before a purchase, you should definitely check for these and be careful. Although I have heard the IRS rarely redeems, which is baffling to me. I would like to see that confirmed somewhere
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Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
6y
Originally posted by @Jay Hinrichs:
Originally posted by @Peter Walther:
Just for the record, if I'm reading the original question correctly, the IRS had a senior lien, one which has/had priority over the mortgage being foreclosed. If that's the case the IRS lien is not extinguished by the foreclosure and therefore the 120 right of redemption does not come into play. The IRS still has a lien on the property for the full amount owed and can bring it's own action to foreclose its lien. However in this case it sounds like the lien has been released so the question is moot.
yes foreclosing a junior lien does not remove a senior lien not matter what it is.. although in practice its pretty rare to have IRS lien senior to bank loans.. maybe a private loan where a lender never requested lenders title insurance.

Not as rare as you might think, liens of all flavors get missed all the time in title searches.

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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
6y
If the mortgage was recorded in 2009 and the FTL was recorded in 2010, the FTL would not have been a "senior" lien unless it was a prior Notice refiled in 2010 before expiring. So the original question may contain incorrect information.
Either way, 10 years + 1 day is generally the rule for expiration.
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