You can sell a home that has IRS liens. The liens can create added steps in the closing process, but they are not always impediments to selling a house. Many realtors shy away from listing houses that have IRS liens. Arm yourself with information and you may get a listing nobody else wants. Some key things to look at are the fair market value of the house, the amount of liens against the property, including mortgage loans, and the timing of each lien, including mortgage loans. When you include the amount of the IRS liens, it may look like a house is upside down. On paper, the numbers are correct. In reality, it may not be the case.
First, like mortgages, IRS liens list the original amount of the debt. The payoff amount may be lower. Second, the IRS liens may have expired. Third, the IRS liens may not have priority over the mortgages and other liens.
For one reason or another, sellers aren’t always aware when there is a lien on their property. Reviewing the title to see what liens are listed against it will help you know whether you must include consideration of an IRS liability, and it will prevent surprise.
The IRS has a process for releasing liens for the sale of a house. It helps to work with the IRS in advance of closing so the paperwork is in order. You will know where you stand going to closing, and that relieves everybody of a lot of stress. If the sale proceeds aren’t enough to cover the IRS liens, the IRS has a process to ask that they release the unpaid part of the liens nevertheless. You’ll most probably have to provide documents to the IRS in the process, but they are usually documents you already have in your file. While obtaining releases of IRS liens is not the realtor’s role, you can help by providing the sale documents the tax attorney needs to process things. The process is simple for tax attorneys who do this in their practice. Even seasoned real estate attorneys with thousands of closings behind them aren’t experts at this area of tax law. You will benefit from working with someone who is even if this means having a professional handle the IRS liens prior to and at closing and another for the actual closing process.
A closing should be a positive experience. After all, every buyer wants to feel good when they buy a new home. Every realtor wants a smooth transaction and happy clients. If people work through the purchase and sale of a home that has IRS liens without the agony the thought of IRS liens provoke, your success will likely come back in spades.
In summary, know what you are working with and work with a professional experienced in IRS liens. State lines and bar admission limit state issues, but IRS law is the same across the country.
Attorney Ann Brookes; www.taxattorneyatlaw.com ; licensed in CT and MA, admitted to practice before the US Tax Court
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