IRS Liens


#1

I have read many of the threads on the IRS right of redemption. I recently purchased a property where the owner has over $300K in IRS liens. They are all junior to the foreclosing 1st. The 1st shows a debt of approximately $400K. I purchased it for $175K. It has a value of $250K. If the IRS redeems the property, do they pay what I paid at the auction? Or do they in fact rescind the sale and pay the total debt?

I have read many threads on the forum and understand the 120 day period, etc. But not this detail.


#2

Hi Richard,
If the IRS chose to redeem the property (highly unlikely) they would pay the 3rd party investor (you) the amount of the winning bid plus 2% interest. They would NOT reimburse you for any post sale repairs or improvements.


#3

Theoretically, you are entitled to recover money spent to secure the property. Changing locks, boarding up the property, light bill to keep some lights on etc.
BUT, as Michelle said, it is EXTREMELY unlikely they would redeem. I had thought they paid 6 or 7% interest - but that was years ago. Maybe the rate is pegged to some index, can’t recall.
Some people say you should try and “make a deal” to waive their right to redeem. My take is not to do that. It will take 3 months and cost dollars. There is a diff. of opinion on this.


#4

As I am keeping this as a long term rental, I have no need to get the liens released. It would be nice to make the repairs without the fear of redemption, but it seems that no one can recall the IRS making a redemtion. This was an active short sale when it went to foreclosure, and I was told that they had gotten one lien released. I am not sure what to make of that. The liens are big and either one would have gobbled up any equity.