Buying a Property With Federal Tax Liens

Tax Liens & Mortgage Notes
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Buying a Property With Federal Tax Liens

Casey Culver
Madison, AL · Member since 2017 · 16 posts · 2 votes

I was doing research on a home that was scheduled for a foreclosure auction on steps of the courthouse. I found out the previous owner was a realtor who had passed away, so looking through public recorded documents for information on liens and such on this house was pretty tedious. Anyhow, I found out this guy had many liens that I know stick with the property that I would have to pay if I purchased, no problem, would just factor that into the purchase price.

However, this guy also had over $1 million in federal tax liens. Do those stick with the property? Are they something to be concerned about? Should I be scared away? The home is in great condition and is worth $500k easily, state of Alabama.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
5y

@Wayne Brooks

I concur with Wayne. We have foreclosed on many homes with IRS liens and never an issue as long as it’s after the mortgage.

We typically try and get a 14135 prior to the sale to show borrower is not getting any $ back and have to get an official appraisal done but once we follow the process it’s not to bad

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  • Jay ReddingPro Member
    Investor · Fort Wayne, IN · Member since 2010 · 90 posts · 81 votes
    5y
    Casey - This is something you need to talk specifically with legal counsel in the state that the property is in that is familiar with these matters rather than seeking advice from people who may or may not know in this forum.  There is way too much at risk to make a mistake.  You need a good attorney on your team in this state. It is worth every dime you would spend to make sure that you are correct vs making a mistake by listening to someone you thought new from this forum based upon their opinion.  
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  • Joe Martella
    Rental Property Investor · Cherry Hill, NJ · Member since 2015 · 626 posts · 495 votes
    5y

    I second what @Jay Redding said. However, I do not believe that federal tax liens can be wiped out and need to be dealt with. You should consult someone who is an expert in the field. Perhaps your local REIA has an attorney they can recommend.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    As long as the mtg foreclosing was recorded Prior to the IRS lien being recorded (most likely since the lender wouldn’t made the loan) it is essentially a non issue….the mtg is superior and the lien goes away upon the foreclosure but the irs has 130 days to redeem (pay you back), but they never do. 
    Any other lien junior to the foreclosing lienor get wiped out too. 

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    5y

    @Wayne Brooks

    I concur with Wayne. We have foreclosed on many homes with IRS liens and never an issue as long as it’s after the mortgage.

    We typically try and get a 14135 prior to the sale to show borrower is not getting any $ back and have to get an official appraisal done but once we follow the process it’s not to bad

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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    5y

    @Chris Seveney Same with us. I don't believe we've ever had to do anything specifically and the IRS lien seems to go away magically on its own.

    However, we're in a situation right now where we need to expedite the removal. Is submitting the 14135 form the way to do this? In our situation, the property sold to a 3rd party at sheriff's sale in early June. The title report missed the IRS lien and now the bidder is considering filing a motion to vacate. How long before you hear back from the IRS on the 14135? 

    How long before the sale in normal circumstances do you submit the form? It makes sense to do this just to remove this obstacle if you can do it easily.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    5y

    @Andy Mirza

    I have completed that form in one state. In pennsylvania my attorney handled it and it took 30ish days. It’s surprisingly quick.

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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    5y

    @Chris Seveney I found out this morning that we won't be able to do this because the IRS wasn't named in the initial foreclosure complaint. Maybe next time.

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