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The IRS Filed A Lien on My Home, Can I Still Do A Short Sale?

Real Estate Broker/Owner with Mint Properties, Lic. #01871795 Lic. #01871795

March 23, 2011 04:55 PM

The IRS Filed A Lien on My Home, Can I Still Do A Short Sale?

Has the IRS field a lien on your home for back taxes? Are you wondering whether you still can do a short sale with the IRS lien filed on your property? The answer of course depends on your individual situation. But, generally the IRS will remove its lien on your property where it can be shown that the lien has no value. If your property is worth less than the mortgage liens that came before the IRS lien, then the IRS lien probably has no value. So, yes, you can still do a short sale with an IRS lien.

A short sale seller with a worthless IRS lien will need to apply for a Certificate of Discharge from Federal Tax Lien in order to complete a short sale. How will this affect your Central Coast of CA short sale? It means that your short sale will probably take longer to complete while the IRS processes the application for the lien discharge. This makes it even more important to select the right buyer for your property who will wait through this elonganted process.

If you are considering a short sale of your Orcutt CA, Arroyo Grande, CA or Pismo Beach CA home, you should seek out an experienced short sale agent to guide you through this process. There are many pitfalls that can be avoided with the right upfront advice. If you would like a short sale consultation, please call my office to schedule a meeting or a telephone consultation at (805) 938-9950.

Tni LeBlanc is an independent Real Estate Broker, Attorney, Short Sale Agent and Certified Distressed Property Expert (CDPE) serving the Santa Maria, Orcutt and Five Cities area of the Central Coast of California.

*Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement. Not affiliated with the government. A lender may refuse to change a loan.

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Kim Dove

Watson Realty Corp - Jacksonville, FL

Realtor - Jacksonville FL

Wow, I haven't run into this type of situation but this is good information to know. Thanks.

Mar 25, 2011 01:11 AM

Richard Weisser

Richard Weisser Realty - Newnan, GA

Richard Weisser Retired Real Estate Professional

Tni...

Although what you say is fundamentaly true, I believe that Federal liens are always superior by definition.

Mar 25, 2011 01:13 AM

Brian Reynolds

Birmingham, MI

Good information, I too thought Federal liens always took first position and had to be paid.

Mar 25, 2011 01:24 AM

Tom Branch

RE/MAX Dallas Suburbs - Plano, TX

Broker, CDPE, SFR, ACRE, Plano TX Ambassador

Tni,

Our closer takes care of this for us. She's been doing this so long that she knows the local person who handles these.

Tom

Mar 25, 2011 01:27 AM

Kay Bennett

First Realty Company - Cookeville, TN

Your Best Cookeville Area Agent!

Good post!...I had this very conversation in a sales meeting about a month ago..

Mar 25, 2011 01:36 AM

J. Philip Faranda

Howard Hanna Rand Realty - Yorktown Heights, NY

Associate Broker / Office Manager

BB hit the nail on the head. Uncle Sam is actually rather accomadating. HOAs are the most draconian and unforgiving.

Mar 25, 2011 01:43 AM

Tni LeBlanc, Realtor®, J.D.

Mint Properties, Lic. #01871795 - Santa Maria, CA

Tenacious Tni (805) 878-9879

Gabe - Buying homes at a foreclosure auction has its risks and dealing with an IRS lien is just one of those risks.

Cindy - It makes sense really because by allowing the property to go through a short sale - the borrower may end up in a better financial position to pay their tax debt. If the lien has no value what are they giving up really anyway?

Judy- An IRS lien is a special kind of lien. Conrad mentioned (#8 above) about a period after a foreclosure auction where the IRS maintains their lien. I've heard between 90 - 120 days for that - but if it is material to you - you should do some research. Importantly, that information does not apply to short sales -- which is the point of this post. I don't want short sale buyers to be confused by that.

Sally & David - I agree! Very important. Sometimes short sale sellers have liens that they aren't even aware of.

Bryant - Very true compared to other short sale challenges, IRS liens can look like a piece of cake. If a short sale seller is substantially behind on HOA dues and will not pay along with the short sale, it can tank the whole deal. Often, HOA associations are inflexible about negotiating their liens down because the financial solvency of the association is at stake.

Mar 25, 2011 01:54 AM

Tni LeBlanc, Realtor®, J.D.

Mint Properties, Lic. #01871795 - Santa Maria, CA

Tenacious Tni (805) 878-9879

Keith - Yes, being informed can help you address any issue right up front.

Keller Williams - Glad you liked the post.

Thanks Kim!

Richard - Very true I did graze against a term of art there. I changed it - thanks!

Brian - They do have to be paid - - but they will not always be an obstacle to a short sale.

Tom Branch - That's awesome! Good person to know I'm sure.

Thanks Kay.

Phil - Well you know, the HOA has to be paid. Why should one homeowner get a discount? On the other hand though if they prevent a short sale (which tend to sell for more) and end up with a foreclosure (which tend to sell for less) in the development -- it may end up being a penny wise and pound foolish move. So, I can see both sides of it.

Mar 25, 2011 02:03 AM

Rob Spinosa

US Bank - Larkspur, CA

Mortgage Loan Originator, Marin County

Great post. My wife and I purchased a short sale property last year and while in escrow, the IRS placed a lien on the title. We were obviously not aware that this would happen, and it came up at the last minute. We put the seller in contact with a company called Ameritax.com, and they got the lien removed. It took several weeks, but it happened and we closed. I now have a direct contact at Ameritax and they can work in all 50 states. If anyone has a lien issue as above, let me know and I'll be happy to make an introduction, or you can just check out their website.

Mar 25, 2011 02:30 AM

Anonymous

Tni,

Thanks for the information, it's good to know that the IRS can't stop the sale, in this situation, only prolong it. Best.

Mar 25, 2011 02:45 AM

#41

Candice A. Donofrio

Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ

928-201-4BHC (4242) call/text

This is why we require our short sale sellers to FIRST consult with a LEGAL professional. :)

Mar 25, 2011 03:02 AM

Michael Setunsky

Woodbridge, VA

Your Commercial Real Estate Link to Northern VA

Tni, it looks like the IRS is willing to move it as long as they are assure it will get paid. Thanks for the info.

Mar 25, 2011 03:18 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

These are becoming more common. Five years ago I hardly saw any tax liens. We just cleared 3 IRS liens -- count 'em, 3 liens -- from a property in Fair Oaks, CA. But IRS can be a bear to work with, rude and impolite. The second-to-last IRS guy actually closed the file because the seller asked if she could have 2 hours to come home and fax him a document. He said no, slammed down the phone and closed out the file. They're nasty.

Mar 25, 2011 03:55 AM

Sandy Shores FL Realtor®, Melbourne Real Estate

M & M Realty of Brevard Inc. - Melbourne, FL

Brevard County Real Estate, Florida's Space Coast

Tni, Ah IRS liens and short sales? It make the transaction more challenging. But, the IRS does like to sink their teeth in. And, if the lien is taken off that property to complete the short sale, often, we see it turn up somewhere else on that person's other properties or other assets.

Mar 25, 2011 04:17 AM

Kevin Kueneke

Caliber Home Loans - Encinitas, CA

San Diego Mortgage Banker

Tni, the IRS is actually starting to work with clients these days...very different from a few years ago. Thanks for the post.

Mar 25, 2011 04:40 AM

Nick Dailey

RE/MAX Affiliates - Union, KY

RE/MAX: Northern Kentucky Real Estate - NKY MLS - Short Sale

Thank you! I'm actually in the process of working one of these

Mar 25, 2011 05:02 AM

Anthony Daniels

Coldwell Banker - San Francisco, CA

SF Bay Area REO Specialist

I wasn't aware that the IRS would remove such a lien.

Good stuff, thanks for sharing it.

Mar 25, 2011 05:31 AM

Tni LeBlanc, Realtor®, J.D.

Mint Properties, Lic. #01871795 - Santa Maria, CA

Tenacious Tni (805) 878-9879

Rob - Sounds like they came through for you. Glad you were able to overcome that obstacle.

Candice - Yes, it is always a good idea for short sale sellers to consult with their attorney. I find that many people in financial distress don't know when something like this will actually catch up with them -- so they tend to be taken by surprise. That or they sit around thinking that a short sale is not an option because of the federal tax lien on their property.

Michael- Yes, the IRS does liek to get paid!

Elizabeth - You rock! Yes, as times get tougher I am seeing more and more tax liens on property.

Mar 25, 2011 04:48 PM

Tni LeBlanc, Realtor®, J.D.

Mint Properties, Lic. #01871795 - Santa Maria, CA

Tenacious Tni (805) 878-9879

Sandy - Very true, the IRS is not going to forget about their money just ask Joe Louis.

Kevin - Good to hear. Yes, I read recently that they were going to start trying to work things out with folks a bit more given the economic times. We'll see.

Nick - Great! Glad it came in handy.

Anthony - Good info to have if you do short sale for sure.

Mar 25, 2011 04:51 PM

Evelyn Kennedy

Alain Pinel Realtors - Alameda, CA

Alameda, Real Estate, Alameda, CA

Tni:

WOW. Thanks for the great information. I am bookmarking this blog. You always provide useful information.

Mar 26, 2011 06:08 AM

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