What lien has priority over state property tax?

Foreclosure Investing
1

What lien has priority over state property tax?

2

I’ve not heard of anything that is senior to property taxes.

3

I saw this online:
“Certain liens are a higher priority than a property tax lien. Investors will need to check a potential property for delinquent child support liens, IRS liens, and civil liens from court judgments. If you purchase a tax deed with these higher liens in place, you will inherit the responsibility of the debt, even though it is not yours.”

It didn’t say it is for California.

4

California has "First in Time, First in Right” System of Lien Priority. If any other lien is recorded later than property tax lien, then the other lien has higher priority than property lien. Am I right?

5

Hi Sean,

I posted a question regarding IRS lien: Federal tax lien (1040 tax) - Foreclosure Investing - PropertyRadar Community
Then I am reading your posts regarding IRS lien. I have a question regarding your post.
Can I stop the IRS redemption by paying IRS the amount of lien? For example, if the property worth $350,000. I bid it $200,000. The lien amount is $80,000. If IRS reimburse the amount I paid at trustee sale, I will loss cash for keys, and time spent, etc. If I pay IRS $80,000, I can still make $70,000.
Is the redemption mandatory? Can I negotiate with IRS?
Below is your post:

"Correct. Note that the question specifically stated that it was senior to the deed of trust. ? If the IRS lien is filed after the mortgage it is junior and wiped out by the trustee sale… except that the IRS has a 120 day right of redemption in this case where they can take the property from you by reimbursing the amount you paid at trustee sale."

Thank you very much!

6

They have the right, it is not mandatory. I’ve only heard rumors of the IRS redeeming; I’ve never actually seen it happen, so I believe it to be very unlikely. That said, most investors wait the 120 days before investing anything more into the property to avoid any loss should they choose to redeem.

I think it would be super foolish to proactively reach out and try to pay or negotiate a lien that will be forever wiped out after 120 days, but I’m sure they’d be happy to take your money, assuming you can find the correct department to talk to.

7

I worry about that the former owner or a competitive bidder may tell IRS that the house is foreclosed with IRS lien. Then IRS starts to redeem the house…

8

Don’t worry. While not impossible, I’d be very surprised if they redeemed even if you called them yourself and begged them to. There have been investors who regretted their purchase and tried precisely that to no avail.

9

Can I negotiate with IRS that I can pay the lien when IRS plan to redeem the property? Do I need to pay interest?
What if there is a lot of profit in the property? Who is going to get the money if IRS sell the house more than the lien?

10

Hi Cluo - I’ve only heard rumors of the IRS redeeming. In the dozen or so properties I purchased with an IRS lien, I never heard from them, regardless of profit. I know most of the large trustee sale investors, and I don’t know any who have ever seen the IRS redeem, and certainly none of them have called the IRS to alert them of the lien and offer to give them money. As such, I seriously doubt anyone, except the IRS, can answer your question on whether they will negotiate or not.

If the IRS did redeem, they would then own the property. If they sold it, I’d suspect they’d keep any excess proceeds.

11

Hi Sean,
Below is what I found online from a layer. It sounds that if IRS does not redeem the property, the former owner is still reliable for the tax lien.
"You can assign your right to redemption if you want. Realizing that if he fails to redeem, the IRS can still come after you personally for the $189k. You are only off the hook with the IRS if they are paid off.

The IRS debt is still in your name regardless of what happens with the redemption and you personally on the hook for it.

"

12
  1. Yes, the IRS can still go after the former owner. None of your questions have been about what recourse lienholders have against the person named in the lien. And I can’t see how that changes anything for you. All that matters to you, as the buyer, is:
    a. whether the lien has priority (in which case you pay),
    b. the lienholder has the right to redeem (120 days for the IRS), and
    c. whether the IRS will redeem (very unlikely).
  2. No, neither you or the former owner “can assign you right to redemption” - only the IRS has the right of redemption, so only they can assign it.
  3. “You are only off the hook with the IRS if they are paid off” makes zero sense. No one owes anyone anything if it is “paid off.”
  4. No, the IRS debt is not “in your name regardless of what happens with the redemption and you personally on the hook for it.” First it is in the former owners name, not “your” name. Second, if the IRS redeems and collects enough funds to satisfy the lien then the lien is paid, and no one is on the hook for it.

This isn’t a good use of your time. Worry about it if the IRS contacts you. Otherwise just wait 120 days before spending too much money on the property. It really is exactly that simple.