Will IRS sell their right of redemption? - Posted by Clark

Posted by JHyre in Ohio on June 28, 2002 at 13:05:38:

Unlikely. I doubt that “the book” covers selling redemption right, and bureaucrats don’t like to think outside of the lines. Maybe you can contract to purchase the house from them at a set price once they’ve redeemed- sounds a little simpler than exercsing their redemption rights, in the unlikely event that a private individual can exercise a government right…just be ready for bureacratic inertia, because nobody there wants to think, or worse yet, take responsibility for doing things differently.

John Hyre

Will IRS sell their right of redemption? - Posted by Clark

Posted by Clark on June 26, 2002 at 23:46:50:

I understand that when a person buys a house with a fed. tax lien on it at a trustee sale they can buy the IRS redemption rights. This allows them to give clear title to a buyer before the 120 day redemption period is over.

Yesterday I was at a trustee sale where a man bought a house for 150K. Value is 190k. It has a tax lien of 8K. My Question is: Will the IRS sell the redemption rights to me, which would allow me to reimburse the winning bidder and obtain title to the property?

My experience in asking questions directly to the IRS is that I spend half the day on either on hold or talking to people who just want to transfer me back to customer service.

Thanks for any insights.

Re: Will IRS sell their right of redemption? - Posted by Dave T

Posted by Dave T on July 04, 2002 at 22:46:58:

I don’t know if the IRS will sell their redemption rights, but the IRS will exercise their redemption rights if there is a guaranteed buyer for the property at an IRS tax sale.

In this case, if the IRS exercises their redemption rights, the property will go to an IRS tax sale. The minimum acceptable price for the property will at least cover the full amount of the $8K tax lien, the $150K they will have to reimburse the foreclosure buyer, plus any other costs the IRS may incur. The IRS will list the property for sale at auction with a list price at FMV, and at auction they will not accept less than their minimum bid price.

You can offer to be a “guaranteed buyer” by offering to pay the IRS minimum bid price for the property and putting up a substantial deposit. As the guaranteed buyer, you promise to buy from the IRS only if the IRS is not successful in obtaining a higher price at their auction (assuming you do not attend the auction and become the winning bidder yourself).

In practice, the IRS does not exercise their redemption rights unless a guaranteed buyer is waiting in the wings. If the foreclosure buyer is concerned about protecting his equity in the property, he could just pay off the IRS liens himself to preempt the IRS from exercising their redemption rights.