IRS tax lien on REO property

By
Real Estate Agent with Coldwell Banker BRE# 00610923

I ran across an interesting fact in a recent transaction that is worth sharing. I represented a buyer who was purchasing an REO property. Upon getting the Preliminary title report there were many recorded liens.

 The previous owner who had been foreclosed upon had a very common name so many of the liens may or may not have been for this person. To make sure the title was clear it was necessary to obtain the SS# of this person to identify if in fact the liens belonged to him. That in itself was a challenge getting the information from the lender due to their swamped situation.

 The important thing  - one was an IRS lien which as you know comes before anything else. Apparently you must wait 120 days after the date of the foreclosure to remove this type of lien. So as a buyer you do not want to close escrow until you are sure this lien has been resolved. The bank that foreclosed did not record their foreclosure immediately ( Actually the foreclosure took place in Oct but was not recorded until the end of Feb. It seems the lenders do not always want to immediately show how many foreclosures are on their books. In this case, it was a Countrywide loan)) We had to have the title company keep checking for the deed to be recorded so we could determine the exact date of the foreclosure so we could start the 120 days countdown.

This was a unique situation but definitely one to know about. I have to give the title company credit for alerting me to the situation.

Moral of the story- read your prelims. This occurred in California so I'm not sure how other states handle such situations when attorneys are involved.

 

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Tags:
california
reo
irs tax liens

Comments 9 New Comment

Anonymous
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Anonymous #5
Anonymous
Carolin

Can a Lender request some sort of discharge of the IRS Lien?  To remove it from the property that doesnt belong to the original borrower anymore?  It doesnt seem right that the lender pay someones taxes for them.  What does the IRS do if someone doesn't own property?  would they be able to record whatever document they would normally record when someone doesnt own property, and discharge the lien against the property that belongs to the lender?

June 11, 2008 03:28 PM
Rainmaker
279,419
AJ Heidmann
YOUR Alexandria & Arlington, VA Real Estate Expert
McEnearney Associates, Inc.

Nice point to bring up.  I've never run across this situation in a foreclosure, but have in a resale setting.  Guaranteed that this will be a nugget that will sit quietly in the back of my brain until a transaction forces me to think... and there it will be.

Thanks!

June 20, 2008 06:10 PM
Anonymous #7
Anonymous
Carolin

This would be after foreclosure when the property is owned by the bank.  Title needs to be clean prior to sale and IRS liens show up on title.  Is there a way to have the IRS release the lien from the property but keep the lien against the debtor? 

July 11, 2008 10:47 AM
Rainmaker
104,398
Grace Keng
CRS, CDPE (408) 799-8887
Keller Williams Realty Cupertino

Nice points!

 

Grace Keng

August 03, 2008 08:37 PM
Anonymous #9
Anonymous
Lou

An IRS lien does NOT come before everything else. 

June 22, 2009 04:48 PM
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Rainer
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Joanne Fraser The Broker of Choice

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