IRS Redemption Experiences

I have read many of the posts with great information and insights into IRS liens and the IRS right of redemption. It is clear that the IRS has the right to redemption within 120 days. And that this can and does cause issues with buyers getting title insurance. So, it is, a Risk. But it also seems that there are no reports on the forum of anyone with the experience of having a property bought at trustee’s sale redeemed by the IRS. I spoke with my title officer and he said it was not a big issue becuase there is no equity these days. In fact, they have been issuing title policies after review for properties with junior IRS liens.
I was thinking about this and basically came to the conclusion that the IRS would probably not get a better price than was paid at the trustee’s auction, so the public auction process served to set fair market value. In fact it would seem that the IRS could redeem a house and loose money at their auction. Enough of my guessing, as it is the IRS and God only knows (I am not sure God knows) what the IRS is thinking.
Does anyone have current experience of knowledge of any IRS redemptions? Would be nice to get a feel for just how much of a risk this is.

Never heard of one, though I talked to the head of that department a few years ago and she claims they do happen. But at the time they had essentially no budget ($1M) to outright buy anything, so essentially they would just “double escrow” properties that people contacted them about.

Thank you Sean. I appreciate you sharing your hard earned experience. I can understand the black letter regulation, but what happens in the current enviroment is a different thing. That takes hands on experience and I am a newbie.
I purchased a home at auction yesterday and it has junion IRS liens. No surprise, I knew about them so I did not miss anything. Opeing bid was $230K on a house with $843K in 1st and 2nd loans. So, there was a lot of bidding by the veterans, which in some ways, gave me confindence that the IRS liens were manageable. I know it is not a good idea to abdicate my judgement to others, but these guys and gals have a lot of experience.
I am working with the title officer now to find out how to proceed to get them onboard with the title issues so we can plan to sell the house. Would a preliminary title report be of any use? Is there a way to ask them for an official opinion on if and when they would issue title insurance to a buyer/lender?

I usually open escrow on any house I plan to flip as soon as I own it. As a natural part of that a prelim will be ordered, which you can review and discuss with your title officer once complete. They will likely say that the IRS right of redemption will have to remain an exception to issuing a title insurance policy until that redemption period has passed - something most lenders will not accept. Once the period has passed the title company should be willing to remove those exceptions and you should have no problem having them insure a transaction (assuming there are no other issues).

I am an experienced property buyer at trustee, short and REO properties. A partner of mine and I are starting a company in which negotiating with the IRS will be our primary function. Let me ask you guys, what would this value of this service be to you? Please PM me if you are interested in our services.

Paul -
IMHO -Think you are wasting your time. Almost no one will buy a property where there is an IRS lien. Only a minuscule number of fcl. even have IRS liens.
IRS gave up tracking fcl. a few years ago.
OTH - there obviously must be a market for such services - not related to a fcl. sale judging by the number of ads on TV and internet.

Hi Paul,
If your looking for help with the Auction Properties I would love to help you. I work for Fidelity National Title and have over 18 years in the Title & Escrow business. I can explain all the documents and help you with any questions about the Title Process. I can also share what I have seen in escrow with the IRS lien’s. Would love to help you in exchange for escrows. Call me when you get a chance. Smiles Shelly 916-708-2603

Hi Guys…It’s Shelly G from Fidelity National Title. Sean is right open the escrow up as soon as you purchase it. My escrow officer’s help get the IRS lein removed before the redemption period. Sometimes it works, others times not, but we can help you. Please call me at 916-708-2603 to anwser any questions. I can also put you in the hands of a escrow officer that can help.

I can tell you from personal experience that Shelly G is a GREAT contact for any auction investor. She is one of those rare title company people that understands the investors position. I have seen her work some miracles on title issues. Thanks for contributing Shelly!!

Good afternoon. I am currently in Escrow on a property that was purchased by an investor at a trustee sale. My wife and I had been watching this house for a year knowing it was in foreclosure. The investors presented themselves through a friend to get it done. We thought it would be quick, but learned it has IRS liens, so we are waiting out the 120 days. We are currently on day 69. We are terrified of losing this place, we’ve been searching for a place like this for years and absolutely love it. The investor and real estate agents, as well as escrow officer have been great, but have very little experience with the IRS and nobody wants to rush anything for fear of “poking the sleeping bear” Any help? We could close immediately if this wasn’t a factor. Any advice would be appreciated more than you could know. Thank you for your time.

At day 69, waiting the 120 days is probably the easist thing to do. Redemptions are very rare, so it is unlikely the IRS will redeem. The IRS is a slow, with the holidays, you may only cut a couple of weeks off of your wait. But if you call the agent on the lien, he will probably tell you that they have no intention of redeeming and that you can pay them $1,000 to $5,000 and they will give you a release. Just knowing that may be worth it.

You are right. You don’t want to wake up a sleeping bear… As I mentioned above, the IRS no longer tracks every fcl. where they get notices. Once it a great while there is an aggressive agent who might be following a particular debtor - but that’s one in a thousand - or less. This is assuming you haven’t made enemies of someone at the sales. There have been one or two cases where someone will try to cause trouble for an “enemy” by waking up the IRS. Unless there is a great deal of equity, the “bad” guy won’t bother to put up the 20% deposit to get the IRS to redeem. At this point there is no point in trying to make a deal w. the IRS to release there right of redemption. They make you jump thru hoops and often take 2 months or more to get back to you. I’m of the theory to wait it out. We made law in the 9th circuit on a redemption issue - probably before you were born, In the 1970’s. While we lost that case, we subsequently were able to use that decision against them in a couple of situations.

We haven’t made any enemies that I know of. There is a decent amount of equity in the home though. Do they know any of that when the lender we’re going through does an appraisal? Or is that private? The fellow that lost it has a business in town, and knows it’s us that’s buying it. That may be the only enemy we’ve made. I doubt he has the money to put up, or he would have paid his taxes and kept his house. But, I have heard that the redemption risk is much lower in that case because he has something else to go after besides a house he lost. Is that true?

One more question, does the 120 days start from the date of the trustee sale? There’s some conflicting info online and I wasn’t quite sure. I really appreciate all of your responses. It’s such a foreign situation, and nobody we know has any experience with any of this. Thank you to everybody

There are currently 4 properties listed on the IRS website seeking bids. That is 4 in the entire US !! Miket is a very savy investor, sit it out and try to enjoy the holidays.

I think the date of the sale. If you are wanting an owner’s title policy, the title company will probably use the date the trustee’s deed is recorded.

The start of the 120 day period is interpreted differently by title companies. Some start the count as of the sale date and others will not start the count until the Trustee Deed recording date. So you want to insist that the title company use the sale date. I watched a property in San Diego County where the IRS tried to redeem a foreclosed property. I don’t know what they were thinking because their payoff to the investor who bought the property at auction would not have left any room. They did not get any takers (putting up minimum bid amount) and they had egg on their face after all their efforts to try to redeem. IRS agent told me it costs them between $5k to $10k internal and external costs to do the redemption.

Thanks again everybody, I really appreciate it. Merry Christmas.

HI Curtis, You are getting great advice. Although we cannot put our hands on a single case where the IRS has recently redeemed a property after a foreclosure the title company will not issue an owners policy until the redemption period has expired. By waiting you are insuring that when you do close on the property you will have clear title and an owners policy to protect you. It is worth the wait.

Technically it IS the SALE date. In the days when IRS did redeem, they would rush to meet that deadline. What some of the professionals would do, just to make the IRS work harder, was to not record the Trustee’s Deed. Sometimes, in those cases, the IRS would get the Trustee to issue another Trustee’s Deed and record it themselves. (Can you imagine what the IRS must have to do to get a recording check?) In a few cases they would simply redeem w.o. a Deed being recorded. The IRS used to run roughshod over everyone - including taxpayers. The abuses became so bad that Congress did make changes. Eg. I acquired a half interest in a property. IRS seized the other half interest and was holding an open house for prospective bidders. I asked the agent if he was telling people that they would be buying a half interest w. me as their partner. He said if I showed up at the sale he would have me arrested! I showed up. 20 people were there who had submitted sealed bids. Before anything started, the agent said “I think the man in the back of the room (me) wants to make an announcement”. I said any purchaser would have a half interest w. me as partner. Agent said “In light of that, I’ll allow everyone who wants to withdraw his/her bid.” Everyone did withdraw. What the agent had done was taken a bid the day before from an elderly lady (RE Broker) and told her she didn’t have to bother coming to the auction. He took her bid! I thought the poor lady was going to faint when I finally reached her a week later to tell her “hello partner”. I let her list the property and she did recover about 80% of her money.