The Auction & The IRS

I have a great story to tell you.

I bought a house at the Utah county, Utah foreclosure auction 6 weeks ago on April 24.

My partner on the deal sent me on my mission to have the winning bid (under our threshold) on a newer house in Lehi, Utah.

There were over 20 other bidders there, and this was the only house being auctioned off. So the odds sucked. And then they made us stand outside in the cool morning, so I was a bit grumpy about that too since I forgot my coat.

There were two of my regular clients there, which was fun until I realized they were now my competitors.   Fortunately, once I started bidding, they knew I was serious and they backed off, which was very kind of them. (One of them had just closed on a flip I had sold him a couple months earlier where he made at least $30k, so he was feeling okay about it, LOL.)

I prevailed with a winning bid of $287,200.

After the victorious paperwork was done, one of my two clients in attendance calmly asked me "Did you know about the IRS liens?"

Say what????!

"Yes," he said, "they are about $30k. And unlike all the other liens that are now wiped out, the IRS liens stay on the property for 120 days, during which time the IRS can redeem the property for taxes. They can buy the home back from you for what you paid for it, but with interest. So if you rehab it, you could lose all your work. So wait the 120 days."

Crap! Obviously, my partner had missed a monumental detail.

Well, after some research, I discovered that the house actually had THREE liens from the IRS totaling $32,000. Now what?

Well, I went to the home finally, and on top of the lien, it turns out the home is very much occupied. So now I have to evict too. This is not a good day after all.

The family wants to stay another month, and they agree not to further trash the place. My partner and I agree. Yes, the hard money is painful, but it's not like we can do anything with the house.

Or can we?

After some research, I found out that you can petition the IRS and wave some cash around in the air, and try to buy out their position, wiping out the liens.

So I called the local IRS office and talk to a very kind woman who knew all about the auction deals, AND she was the one to review the local cases!

So after gathering all the documents she asked for, I had to FAX 11 pages to her, including my offer of $500 to wipe out those $32,000 of liens. She promised she would review the case and get back to me.

After waiting two weeks I got one of those dreaded IRS envelopes.

But this time it was not just good news, but awesome news:

"We have determined the interest of the US under the Federal tax liens outstanding is at present $500."

Yahoo. We did it!

And now we don't have to wait 80+ more days at $100 per day on our hard money, saving at least $7,000.   (It will take 10 days to get this ready to sell because it's not trashed)

After lots of additional consistent prodding over the past 6 weeks, the tenants finally left on Monday. Yes they left piles of debris, and they hadn't watered or cut the grass for weeks. But I get it. And I do feel sorry for them.

But today I got the letter from the IRS.

Today was a good day.

Steve Theobald

p.s. Lessons learned:

• Do more homework to verify all liens.
• Stop by the home, even if it is newer and probably doesn't need a lot of work.