Trustee forgot to properly notify IRS about the sale. IRS now says their lien stands. Can I rescind the trustee sale? This is in California.
Thank you,
Alexei
The trustee is typically the party that will take action to rescind the sale if they (ooops!) forgot to vet title for IRS liens and failed to notify the IRS. Questions: 1) Have you received your trustee’s deed upon sale? 2) was it you who contacted the IRS re the lien status … thereby awakening the giant? 3) When they said “their lien stands” did the IRS give you any indication that they actually intended to redeem? 4) How much is the IRS lien? 5) Is there still equity left for you IF you need to payoff the IRS? NOTE: In some cases you can negotiate the payoff amount with the IRS.
Well, to be honest this is a theoretical situation. I want to make sure I have a way out in case trustee made a mistake and did not notify IRS.?
The problem is that IRS tax lien exceeds the property amount many times over (crazy, I know). So if trustee forgot to properly notify IRS about ALL tax liens do I have an option to rescind the sale? Because technically after trustee sale IRS tax lien will move to the first position if IRS was not notified. I read one opinion that IRS code 7425 does not allow any rescission and reinstatement procedures. However, California civil code ?2924b states that:
The failure to provide the Internal Revenue Service with a copy of the notice of sale pursuant to this paragraph shall be sufficient cause to rescind the trustee’s sale and invalidate the trustee’s deed, at the option of either the successful bidder at the trustee’s sale or the trustee, and in either case with the consent of the beneficiary. Any option to rescind the trustee’s sale pursuant to this paragraph shall be exercised prior to any transfer of the property by the successful bidder to a bona fide purchaser for value.Ideally, I would like trustee to confirm that they mailed proper notices, but they don’t want to cooperate prior to the auction. Hence my concerns. Just need an opinion if I have an option to rescind the sale.
Alexei
Well, to be honest this is a theoretical situation. I want to make sure I have a way out in case trustee made a mistake and did not notify IRS. The problem is that IRS tax lien exceeds the property amount many times over (crazy, I know). So if trustee forgot to properly notify IRS about ALL tax liens do I have an option to rescind the sale? Because technically after trustee sale IRS tax lien will move to the first position if IRS was not notified. I read one opinion that IRS code 7425 does not allow any rescission and reinstatement procedures. However, California civil code 2924b states that: The failure to provide the Internal Revenue Service with a copy of the notice of sale pursuant to this paragraph shall be sufficient cause to rescind the trustee’s sale and invalidate the trustee’s deed, at the option of either the successful bidder at the trustee’s sale or the trustee, and in either case with the consent of the beneficiary. Any option to rescind the trustee’s sale pursuant to this paragraph shall be exercised prior to any transfer of the property by the successful bidder to a bona fide purchaser for value. Ideally, I would like trustee to confirm that they mailed proper notices, but they don’t want to cooperate prior to the auction. Hence my concerns. Just need an opinion if I have an option to rescind the sale. Alexei
Alexi … This is just my opinion, and glad to be corrected by anyone w more ‘IRS lien’ experience … It is the trustee’s responsibility to send (“cc”) the IRS a copy of the NTS. I have heard of cases where the trustee, upon learning about their ‘failure to send’ notice to the IRS, subsequently rescinded a trustee sale. BUT that ‘rescind action’ will virtually always take place before they have issued the trustee’s deed upon sale (TDUS). So again, it is the** trustee** who can ‘rescind,’ not the 3rd party buyer at an auction (trustee sale). Once the trustee has sent you the TDUS, there is no ‘do over.’ ?You could always go to court (sue the trustee) and attempt to get a judge to invalidate the sale, but that is not a safe or fruitful path to follow. As you quoted text from the IRS … let me highlight [failure to properly notice the IRS] " shall be sufficient cause to rescind the trustee sale" … that does not say “WILL BE mandatory”]. All of this debate/angst is likely moot, as most trustees are careful to follow the proper notice protocols. Rather than awake the IRS, many investors will wait 120 days post trustee sale, before spending any $ on property fix/upgrades. After that time-period, **if **the IRS has **not **taken any action to redeem, then (JMHO) you would be ‘in the clear’ (the IRS will not be able to redeem). If the IRS was improperly [or never] “noticed” by the trustee, and 120 days have passed by since the trustee sale, then the exposure belongs to the trustee (< again JMHO).?
? ? ? The Trustee’s Deed imparts certain warranties to the purchaser. ?There will be language in the Deed stating that the Trustee has complied with all requirements. ? As an aside, since the IRS no longer tracks (or redeems as far as I know) sales that are sent to them since the crash - where do the notices go to die? ? Pre-crash - IRS would follow up after many (most? all?) sales to see the results and determine whether it was worth doing anything further.
Alexi … adding to Miket’s good points … in the wake of the real estate 2008/9 meltdown, ‘IRS redemptions’ are fewer and far between. Reason being, when the IRS redeems, they are stepping into your shoes (taking over your position as the trustee sale buyer). When they do so, they must refund your money. They are also responsible for any senior liens/judgments that still stand (recorded before the loan that went to trustee sale). They don’t get the ‘house for free.’ So just as you would do an economic analysis, the IRS too, must justify coming out of pocket with taxpayer $$ to ‘take over’ the property. The IRS has a limited budget for redemptions, and at present, it must be a special situation for the IRS to redeem. But to play it safe, wait the 120 days before spending $ on fix-ups. If it were a small IRS lien (which is not the case you’ve described), some investors would prefer to negotiate a quick reduced payoff/settlement with the IRS vs waiting the 120 days.