Removing IRS Tax liens - Posted by Shawn McCarty

Posted by David Alexander on April 06, 1999 at 22:09:41:

You’re right that would put you in third position and would not wipe out any liens, but? If you created a third, took over payments and then there was no debt service to the IRS lien, you would have some serious Cash Flow? Maybe somehow at a later time you could convince the IRS to remove the lien. If not, and I’m not a rental person by any means, I believe I would still do this deal for the cash flow, and you would have very little invested.

Or go after buying the defaulted first Note at a discount. Heck do both, while creating the third go for getting the first bought, when your in first position you could then foreclose.

David Alexander

Removing IRS Tax liens - Posted by Shawn McCarty

Posted by Shawn McCarty on April 06, 1999 at 24:43:53:

Hi everyone,
I found a boarded up 2400 sq. ft duplex needing 20K of repairs to be worth 180K. I tracked down the attorney owner who said that "I owe $50 K on a first mortgage in default, and there are IRS liens on it for $100K. Make me an offer."
Questions:
Does the IRS discount or move liens? If the bank were to foreclose, would the IRS liens be wiped out? Should I make an offer and let the seller worry about clearing the liens?
Is there any way to make a deal under this scenario?
thanks in advance,

Shawn in San Diego

Re: Removing IRS Tax liens - Posted by Rob FL

Posted by Rob FL on April 06, 1999 at 17:55:36:

Working at a title company I have seen the IRS partially release their Federal Tax Lien from a specific property a few times. Although I am just guessing, they probably would only partially release it if the debt was junior in priority to the mortgage and the attorney had other assets to seize.

Otherwise, I don’t see much of a deal for you. Unless the IRS gives you a significant discount there appears no room to make a profit using the numbers you give.

Re: Removing IRS Tax liens - Posted by Jimmy George, Visalia (Formerly San Diego)

Posted by Jimmy George, Visalia (Formerly San Diego) on April 06, 1999 at 24:57:02:

Hi Shawn,

The IRS is a business, just like any business they will only remove a lein when they get paid. I’ve had dealings with the San Diego IRS office and it took me over a year to remove a lein even after the bill was paid. They are not known to discount or sell a lein. I’ll bet the lein is far greater than the property owners equity. Yes when you purchase a property at forclosure auction the I.R.S. lein goes away but they have a right to redeem the property for 6 months, yet they never do. If they do they must pay you back the amount of your purchase plus a small interest amount.
The IRS will eventually sell the property at auction. If you call them you can get dates of the auctions.

Good Luck

Jimmy G.

Re: Removing IRS Tax liens - Posted by David Alexander

Posted by David Alexander on April 06, 1999 at 19:15:45:

Rob,

Correct me if I’m wrong, but if the lien doesn’t have payments(no debt service) to be made on it(was there in the event of a new loan) and the property was deeded to the new buyer or taken over to protect the position there would be some serious cash flow to be had. Just like taking a property subject to, you have a moral obligation to preform but no liability. So you would not in effect have any liability to pay the IRS Lien. And wouldn’t the IRS have to go looking for the guy to get thier debt paid not your newly acquired property.

David Alexander

Re: Removing IRS Tax liens - Posted by Shawn McCarty

Posted by Shawn McCarty on April 06, 1999 at 17:11:23:

Thanks for the help thinking, but I am confused.
If I do take over the property subject to the existing loan, why would the IRS remove their lien?
I would be looking pretty bad if they kept their lien, and I repaired and rented the property, and then the IRS foreclosed.
IF I do create a third lien, and then foreclose on it, the hope is that the IRS will not bid, and that I could get the property for the first and my lien wiping out the IRS lien?
Is this the strategy or am I missing something> I really wanna know!

thanks,

Shawn

Re: Removing IRS Tax liens - Posted by Shawn McCarty

Posted by Shawn McCarty on April 07, 1999 at 09:02:22:

David,
The property is boarded up and needs 20K to rehab. It is interesting that there is a lien with no payments, and if the property was rented and generating a cash flow and I could just take it over, why not! If I did improve the property it would make it that much more atractive to the IRS. The goal would be to get that IRS lien dropped following a foreclosure before rehabbing.

enjoying,

Shawn

Re: Removing IRS Tax liens - Posted by Rob FL

Posted by Rob FL on April 06, 1999 at 19:43:27:

The IRS lien is kind of a Federal Law type of lien. It is a baby of the U.S. Code.

It has a two part punch.

  1. It becomes a debt to whomever it is recorded against. Meaning that the lawyer fellow who didn’t pay his taxes owes this money to the IRS and the IRS can hold him personally liable to repay the debt.

  2. Is the lien part. Once recorded, the Federal Tax LIEN becomes a lien on all property owned by the debtor. If he owns 3 houses it become a lien on all 3 of them. Regardless of who owns the property, once the lien attaches, the property is stuck with the lien until it gets paid.

Think of it like a mortgage and promissory note. A promissory note obligates whoever signed it to personally pay all the money back according to the terms of the note. If they don’t the debtor’s credit will get all messed up and the bank could sue them and other nasty things. A mortgage which goes along with the promissory note means that the debtor in signing the note pledges a certain property as collateral to repay the note. Even if the debtor dies or sells the property the mortgage remains. It must be paid or the lender can take the property.

Federal Tax Liens are considered a general lien meaning that they attach to anything the person owns and not just a specefic property. Mortgages are a specific lien in that they only attach to the property being mortgaged not all the property of the debtor.

I hope that kind of helps.

Re: Removing IRS Tax liens - Posted by Jimmy G.

Posted by Jimmy G. on April 06, 1999 at 19:42:45:

Hi Shawn,
Confused? In California If the Property is forclosed by the 1st. all jr. leins are erased and the Jr. Lein holders lose byt could pick up the payments in their stead.
The I.R.S. as a Jr. Lein holder has a right of redemption period also. If they redeem the property
(which I have never heard of them doing) they must make you whole. Pay
you your cost back plus interest. In California if you buy a forclosed
property at auction you must pay cash for the property at the auction. Where you
borrow the money from is of no concern. I don’t know of any opportunity
at the forclosure auction to take over the property subject to the existing
loan, the IRS will not remove their lien if you don’t go through forclosure.
They will keep their lien if there is no forgivness of debt.

If you have a 3rd and forclose, you must pay off the 2nd and 1st. to claim
the property.

IF you do create a third lien, and then foreclose on it, the IRS doesn’t
need to bid.

That’s the benefit of being a 1st lein holder.

The 3rd. wins, now you get to pay the IRS, you simply have exchanged
the former debtor with yourself.

Got it now?

Jimmy G.

Re: Removing IRS Tax liens - Posted by Rob FL

Posted by Rob FL on April 07, 1999 at 18:35:36:

If the mortgage company forecloses, they will more than likely sue the IRS as a junior lien. Once the sale occurs, the IRS has 120 days to redeem. After that, their lien is gone forever from the property’s title.