IRS tax sale - one novice's experience

By
Real Estate Agent with Blondie Realty, LLC 51459-90

In a previous post, I described being contacted by an out of state investor interested in pursuing real estate to be sold in a tax sale.  Coincidentally, the property which the out of state investor contacted me about ended up in the hands of one of my clients.  As the successful bidder of a property seized by the IRS and sold for nonpayment of taxes, my client (and I as broker) had lots of unchartered territory to muddle our way through.

Soon after the purchase, my client contacted me to list the property for sale.  She was concerned that another party's name appeared on the tax bill. Surely just an example of typical delays in processing paperwork.  A quick search and hold of the title proved valuable since my client was apparently a joint title holder with a complete stranger.

According to my client, once the 180 day redemption period passed after procuring her spot as the successful bidder, my client paid the remaining balance due, and the IRS sent all documents, including a quit claim deed, to my client. She promptly recorded the quit claim deed with the local municipality and the sale was final...or so she thought.

DID SHE ONLY BUY ONE HALF INTEREST IN THE PROPERTY?

According to the municipality...yes.  At the time the IRS seized the property, there were two people (unrelated) on title.  When the IRS sent the quit claim deed to my client, it only listed the party from whom the property had been seized for nonpayment of taxes.  The other party on title wasn't mentioned in any of the documents.  My client wasn't aware of another party at the time of the sale.

IS THE INTERNAL REVENUE SERVICE IN THE BUSINESS OF DEFRAUDING UNSUSPECTING REAL ESTATE INVESTORS?

No...it's not even an issue of caveat emptor (buyer beware).  Bottom line is due dilligence when purchasing real estate unconventionally.  In this case, it turns out that the IRS had a statement from this mystery title holder that stated that they had no interest in the property.  Unfortunately, this signed statement is not in an acceptable format for recording with the municipality.  If the proper due dilligence had been executed, the buyer would have demanded proper documentation from the IRS to ensure clear title BEFORE paying the remaining balance due.  We could have avoided a lot of backtracking and wasted time.

On the flip side, we're avoiding future legal troubles by clearing title now rather than waiting until seller accepts an offer and then scrambles to provide evidence of clear title to the new buyer.

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Wisconsin Kenosha County Kenosha
Tags:
due dilligence
quit claim deed
irs tax sale
seizure of real estate
kenosha commercial real estate

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Rainmaker
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Phil Leng
Retired - Kirkland, WA
Phil Leng - Retired

Wow Melissa,

Never heard of that before!

Interesting story, and a lot of work.

Congratulations on the sale.

Thanks for sharing this.

Phil

Mar 15, 2011 09:34 PM #1
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Rainmaker
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Melissa Hua

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