IRS tax lien on REO property

Real Estate Agent with Alain Pinel 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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Rick Sergison
RE/MAX West Realty Inc. - Durham Region & East Metro Toronto - Pickering, ON
Durham Region Real Estate Blog

I just stopped by to welcome you to Active Rain. I hope that you find it a great benefit to your business and that you see the value that I have also found here. I am from Charlottesville Virginia and using Active Rain has really increased my business!

My main blog on Active Rain is here: Charlottesville Real Estate Blog, not the link at the bottom of this post.

I hope you will look into the many groups as there are some great group both local and broad based,....


Mar 11, 2008 12:08 PM #1
Cheryl S . Glover
Keller Williams Classic III Realty - Clermont, FL
Very interesting, the new items that we seem to be running into.  I certainly will watch out.  Thank you for the information.
Mar 11, 2008 02:56 PM #2
Jaime Kosofsky
Brady & Kosofsky, PA - Matthews, NC

This is a common occurence in my Law Practice.... to go a little further, the IRS will typically not redeem if there is no equity--- so very often I can get the title insurance company to provide affirmative coverage over the lien.... so then the contract requirement of insurable title is met....

Jaime Kosofsky, Esq

Brady & Kosofsky, PA


Mar 12, 2008 03:45 PM #3
Keith Perry
Coldwell Banker - Hiram, GA
REALTOR - West Metro Atlanta

Hi Joanne, it was a very good thing you where able to find out first. Here in Georgia we have attorneys close our transactions and run title. Glad you had a good title company to work with.

Oh and "Welcome" to AR!! There are loads of good information and people here.

Mar 13, 2008 01:36 AM #4

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?

Jun 11, 2008 08:28 AM #5
AJ Heidmann ~ CRS
McEnearney Associates, Inc. - Alexandria, VA
YOUR Alexandria & Arlington, VA Real Estate Expert

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.


Jun 20, 2008 11:10 AM #6

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? 

Jul 11, 2008 03:47 AM #7
Grace Keng
Keller Williams Realty Cupertino - Cupertino, CA
CRS, CDPE (408) 799-8887

Nice points!


Grace Keng

Aug 03, 2008 01:37 PM #8

An IRS lien does NOT come before everything else. 

Jun 22, 2009 09:48 AM #9
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