SHORT SALES AND IRS LIENS

By
Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY
https://activerain.com/droplet/xKX

This being my first blog entry, I figured I would talk about something simple.

In my law practice we see a lot of short sales.  Indeed, we offer a service to Realtors and Sellers to process their short sale material with the lenders (without the downward pressure and lowball influence from an investor handling the process).  I have worked statewide with lenders - visting their loss mitigation departments and sitting in on committee meetings.  Knowing the process is key knowledge to improving the percent of short sale lender approval.

Now that you have the approval, what other bug will kill the deal.  There are plenty still to come.  Today we will address a likely culprit - an IRS lien for unpaid taxes.

The IRS lien can only be avoided if the lien was filed after the mortgage was recorded or if the mortgage money (all of it) was used to purchase the property (a "purchase money mortgage"). And the avoidance only takes place in a foreclosure.

If you are doing a short sale, you are looking straight in the eye of the IRS. The solution is that you are doing a short sale because of no equity and the homeowner is selling without getting any cash.  There are procedures to get a release of the lien of the IRS from the house (not a satisfaction of the lien - just a release).  The procedure is to contact the local IRS regional office and be prepared to offer up the same information as to the banks - and if you already have a bank short sale authorization that will be a plus.

The problem is that the IRS can take a month or longer to process the request.  Hint - WALK the request into the regional office, wait an hour or so and then walk out with the lien waiver.  Easier said than done.  Fortunately for my practice, we have the regional office across the street and a lawyer in my office is a tax attorney and works with the people over there regularly. It's a pain (and I hate paying the extra freight) but getting the lien release is another step in the short sale process.

Any of you have any experiences you want to post?

Copyright 2007 Richard P. Zaretsky, Esq.

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Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 email: RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide!  Shortsales@Florida-Counsel.com  New Website www.Florida-Counsel.com

See our easy to understand articles at:

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Pat Yoest 12/05/2010 07:00 AM
Location:
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Groups:
Keller Williams 'Rainers
REO
Short Sale REALTORS®
PALM BEACH COUNTY SHORT SALES
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Tags:
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foreclosure
short sales
short sale
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Rainmaker
55,577
Doris Barnett-214-236-2908 cell/txt
Consultant - Plano, TX
Real Estate Consultant: Ask for your Better Biz
I have had this question come up with no good answer, thanks for filling in the blanks even though I live and work mostly in TX right now. I am licensed in FL as well.
Oct 28, 2007 11:36 PM #1
Rainer
168,035
Matthew J Blum - (retired from the business)
Palm Beach Gardens, FL
Richard, Great post.  Will the IRS ever re-subordinate the lien if the client is making monthly payments?
Oct 28, 2007 11:40 PM #2
Rainmaker
280,033
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

Two comments already -

My comments regarding the IRS have nationwide application and was not meant to be Florida specific.

As to re-subordination - If the mortgage falls into one of the two categories (purchase money mortgage or filed prior to the IRS lien), then as long as the mortgage is not modified as to essential terms (interest rate or more money advanced (but not to protect the collateral)), the IRS will still be subordinate.  So a reinstatement on a foreclosure will not create any new rights for the IRS.

Remember also that under newer case law, IRS lien against one spouse DOES affect the other spouse's ownership in the house that is jointly owned.

RICHARD P. ZARETSKY, ESQ., RPZ99@FLORIDA-COUNSEL.COM

Oct 29, 2007 12:32 AM #3
Rainer
68,124
Irene Morales Ward
REMAX Distinctive Real Estate, Inc. - Stafford, VA
Realtor - e-Pro - Northern Virginia Real Estate
Richard - you must be a very, very busy man these days!  I think many of us are learning these things as we go and your post was incredibly helpful.  There are so many variables in a short sale and I've tried to avoid them as a Buyer's Agent.  I understand the importance to the seller and feel this is an excellent option over foreclosure.  I just haven't seen that the benefits outweight the risks in my area.
Oct 29, 2007 12:34 AM #4
Rainer
24,374
Gene Dexter
Asset Realty - Seattle, WA
Seattle Realtor

Thanks so much. I will look for your blogs in the future.

With a few more posts I wouldn't be surprised if you became a fantastic referral source via lenders throughout the AR community. Short Selling is a hot topic for 2008 in my market.

Take care.

Oct 29, 2007 12:40 AM #5
Ambassador
837,155
Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros
Thanks for the blog. Really good info. If this is your first I look forward to your second
Oct 29, 2007 12:50 AM #6
Rainmaker
187,017
Leo Namiot
Canopy Mortgage - Jacksonville, FL
Outstanding Service & Great Rates

Hello Richard,

   Welcome to active rain, it's a great online community, Enjoy!

 

Leo Namiot

Benchmark Mortgage

Connecticut & Florida

http://www.benchmarkct.com/

Oct 29, 2007 01:45 AM #7
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Rainmaker
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Richard Zaretsky

Florida Real Estate Attorney
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