What now? Pre-foreclosure - Posted by Kristy-AZ

Posted by wpage on July 09, 2003 at 09:11:21:

Kristy If the property gets foreclosed by the bank the 2nd. most probably would get wiped out. I don’t know what would happen as far as the tax lien goes but would like to know. Hope someone can explain what happens to the lien?

What now? Pre-foreclosure - Posted by Kristy-AZ

Posted by Kristy-AZ on July 09, 2003 at 09:04:05:

Hi all,

Awhile back we were working with some friends to get them out of foreclosure. The 2nd was foreclosing and wouldn’t consider a short sale.

It went to auction, and went to the 2nd for what was owed. Now they are not making the payments to the first and the first is foreclosing.

If we were to bid on this at auction, does the 2nd still stay in place since it now has the deed? Or does it get wiped out?

House FMV = $145K
1st = $107K
2nd = $ 37K (2nd thought the house was worth $180K when we tried to work with them, guess they found out different)

Originally the 2nd balance was only $25K, the note was sold to an investor, who started the first foreclosure thinking he was going to get a “Hot” property. This investor lives out of state and has no idea of the values here. Now after foreclosing on the house, he has not made any payments to the 1st who has now started their foreclosure process. PLUS!! this house has an enormous IRS tax lien on it.

So my question is, what is going to happen to the 2nd if this house goes to auction again, by the first mortgage holder??


order/date of the IRS lien?? - Posted by Kristine-CA

Posted by Kristine-CA on July 09, 2003 at 17:59:18:

Kristy: what’s the date of the IRS lien? Was it after the 2nd? It if was after the 2nd wouldn’t the 120 day redemption period for the IRS have started upon the foreclosure of the 2nd? And be almost over?

If that were the case, why not pay the owners (the 2nd lienholder that foreclosed) the smallest amount possible to take the property subject-to the existing financing on that first of 107K (assuming you can make up the arrears).

There would appear to be some equity there if you can get in this way. So the owner is in now for how much? 25K?. How much would he take to let you take the deed off of his hands?

Sincerely, Kristine

my view - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 09, 2003 at 09:48:25:


The IRS lien, if it were junior originally to the second loan would already be wiped off the property. Now that is not quite accurate. It will be off the property 120 days after the trustee’s sale of the second. In the meantime, the IRS has a right of redememption. They can pay the buyer at the foreclosure sale the purchase price plus 5% per annun interest, pro-rated, to and the government will own the property. They could then sell it via a government-owned auction sale.

The IRS will not, in my opinion, redeem this property because there is not enough equity to make it worthwhile.

You might approach the new owner and suggest taking it off the owners hands for $20K, a small down payment and the rest of the purchase money to be paid over time. Then you do a quick clean-up and resell rapidly for near FMV.

Good InvestingRon Starr****

Certificate of Discharge of Property … - Posted by Randy

Posted by Randy on July 09, 2003 at 09:44:58:

The Federal Tax lien is discharged. Info at the link.

If application is made under the provisions of section 6325(b)(2)(A), or 6325(b)(2)(B) because a mortgage foreclosure is contemplated, there will be a determination of the amount required for discharge or a determination that the Federal tax lien interest in the property is valueless. Within 30 days from the date of the application, the applicant will receive a written conditional commitment for a certificate of discharge. When the foreclosure proceeding has been concluded, a certificate of discharge will be issued in accordance with the terms of the commitment letter. Also, see Publication 487, How to Prepare Application Requesting the United States to Release Its Right to Redeem Property Secured by a Federal Tax Lien.

Re: What now? Pre-foreclosure - Posted by jeff

Posted by jeff on July 09, 2003 at 09:36:41:

there is no longer a second. once the second foreclosed it became the owner with a first lien on the property. when the first forecloses the new owner (which PREVIOUSLY was the second), the first will be the new-new owner with no liens (except that tax lien you mentioned.) the second will simply receive any overages received from the sale of the property at auction, unless of course they purchase it at auction one more time.