I plan to buy a short sale house. It've been approved by the lender. But I find out there 2 liens on the house: federal tax liens . sellers and

Asked by Dean, Irvine, CA Sun Nov 13, 2011

lende I plan to buy a short sale house. It've been approved by the lender. But I find out there 2 liens on the house: federal tax liens . sellers and lender won't pay. How do I wipte the liens before buying
Dean

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Thom Colby, Agent, Irvine, CA
Sun Nov 13, 2011
Dean -
Whenever there is an IRS lien, the SELLER must cooperate and take some action to get the release. If the Seller takes a copy of the Estimated Closing Statement showing that no equity exists to the local IRS office in Laguna Niguel, it can be released if requested by the SELLER. It will take about 6 - 8 weeks but it can happen. The IRS will release the lien from the Real Estate so that the property can close escrow. HOWEVER, the Seller has to agree to a repayment plan for the debt to the IRS in order for them to do it.

The big obstacle you may have is whether the Seller is willing to cooperate or not. If not, get out of this transaction ASAP and find another home to buy - there are PLENTY available.

Best of luck,

Thom Colby
Broker / Owner
Newport Beach & Palm Desert CA
3 votes
Harrison K.…, Agent, Irvine, CA
Sun Nov 13, 2011
A prior answers here said:

"The negotiator is usually a lawyer." That's not necessarily true with short sales. An experienced Realtor or real estate professional with short sales can be a very good negotiator. It is not required or recommended that such negotiator be a lawyer.

"even in a bankruptcy lawyers fees and taxes are never forgiven". It is untrue that in BK lawyer fees are never forgiven. Most obligations to pay legal fees are in favor creditors without security and are subject to being discharged in bankruptcy.

"The IRS will reduce tax liens". This is untrue in all situations. The IRS is probably reluctant to reduce tax liens.

Harrison K. Long, Realtor and broker associate, Coldwell Banker Residential Brokerage
2 votes
Karen Parsons…, Agent, Laguna Beach, CA
Wed Nov 16, 2011
Hi Dean,

If you really want the house....you can offer to pay the tax lien. I'm not saying you SHOULD or that it's FAIR, but that's a decision you can make. I've had this happen before.....with an investor buying a very nice property at the beach...he wanted the home and brought money to escrow to pay off an IRS lien and a judgement.

It's a bummer....but that's one way to make it happen.

Hope it works out for you,

Karen
1 vote
Melissa Zava…, Agent, Escondido, CA
Mon Nov 14, 2011
Good luck getting this closed. It is the responsibility of the listing agent (who is probably the short sale negotiator) to get those liens off the title so that you can close. In a short sale, the seller can contact the IRS and make arrangements for the liens to be removed. However, this does not happen overnight, so the seller and his agent will need to get crackin'.
1 vote
Shadi Kian, Agent, Lake Forest, CA
Mon Nov 14, 2011
Hello Dean;
As Thom said, the seller Federal Tax lien can be removed by going to local tax office with his supporting documents and promise to pay signed by him. The bottom line is if seller is not working with you in his own Federal Tax Lien, Please, Please walk away.
Good Luck
Shadi Kian
Broker
1 vote
Thom Colby, Agent, Irvine, CA
Sun Nov 13, 2011
Dean,

To add to what others have said, it is unlikely the IRS will discuss the lien with YOU. YOU are not the debtor, tax payer, or the property owner. The SELLER *MUST* cooperate and participate as they will have to make other arrangements with the IRS on a repayment plan.

Other than the Mortgage and the IRS Lien - what is the other lien?

Thom Colby
Broker
Newport Beach & Palm Desert
1 vote
Sarah Goulart…, Agent, Plymouth, MA
Sun Nov 13, 2011
Dean,
As the others have suggested, the selling agent or your buyers agent should be able to walk you through this. The seller can 'apply' to have the lien removed from the property. The government (if they are both tax liens) has been working with individuals short selling their homes to do this to help them move forward with the short sale. Note that they are NOT forgiving the loans...just allowing it to be removed from the short sale property so the sale can go through. You will need the seller's cooperation in this.

If the other lien is not a tax lien, you may have a bit more of an issue....but the first step is to work on the tax one.

Good luck!
1 vote
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Wed Nov 16, 2011
That is part of buying a short sale, cleaning up someone else’s wreck. No one is obligated to take less than owed in this process, If the seller and lender are not going to help, there may not be a solution short of foreclosure.

Info on Lease Options:
http://www.trulia.com/blog/jimsimms/2011/11/rent_option_or_r…

Info on the criminal side of Credit Repair:
http://www.trulia.com/blog/jimsimms/2011/10/credit_repair_ca…

Info on Down Payment Assistance in Kentucky:
http://www.trulia.com/blog/jimsimms/2011/03/down_payment_ass…
0 votes
Terry G Hunt…, , Newport Coast, CA
Sun Nov 13, 2011
Dean:
To clarify my original answer, it is the property that can probably be released, not the personal obgligation of the tax debtor.
The reason for this is that there is no equity in the home for the tax authorities to attach, since they are junior to the 1st TD loan.
If you have problems getting the people you deal with at the tax authorities to understand this basic financial fact, then you need to work your way up the chain until you DO get someone who "gets it" that there is nothing to attach. You should, with patience, succeed in this.
Terry
Web Reference:  http://www.Hunter-Broker.com
0 votes
Jeff Smith, Agent, Poway, CA
Sun Nov 13, 2011
Dean -
The important follow up questions I would have are: How much are these liens and can they be reduced or eliminated completely? If they are too substantial for you to absorb, you may want to consider another property.
Good Luck!
0 votes
Terry G Hunt…, , Newport Coast, CA
Sun Nov 13, 2011
Dean:
It may take 2-4 weeks, but if you can demonstrate that the seller has no equity in the home (easy, in this case of a short sale), then the tax authorities will probably release the property.
Terry
Web Reference:  http://www.Hunter-Broker.com
0 votes
Lazaro Madrid, Agent, Santa Ana, CA
Sun Nov 13, 2011
Hello Dean,
No matter what everyone said a tax lien is never forgiven an is got to be pay before COE and there is plany bank own and repo houses available; unless you getting a very good deal on this short sale house you may consider pay for this tax lien and if other one is not a tax lien can be negotiated.
Good luck in making the right decision, best regards, Lázaro M Madrid
0 votes
Satar Naghsh…, Agent, Irvine, CA
Sun Nov 13, 2011
Hi Dean,

I've been doing short sales before the market crashed. In fact, I did the first short sale in West Irvine.

Out of all the answers you got, Thom was correct. We removed over 10 Federal and state tax liens. Another option, if they are small liens, is to have the real estate agents pitch in with you to remove them.

Good Luck!
0 votes
Christopher…, Agent, Costa Mesa, CA
Sun Nov 13, 2011
Have the listing agent or your agent go to the IRS and ask them for a lien release. If that doesn't work see if they are willing to take an offer in compromise and settle for a lesser amount. I have dealt with these issues in the past and from my experience if they do not release the lien then the deal is dead. You might have to pay it or move onto another property. Hope this helps.
0 votes
Piere Pirnej…, Agent, Irvine, CA
Sun Nov 13, 2011
You need to work with an agent that has the experience to handle this type of situation. The Tax liens have nothing to do with the current lender and have to be negotiated separately. How much are they and what is the property really worth, also was your agent aware of these liens prior to having you write an offer that would put you in this spot. First you can try to have the person negotiating the short sale go back to the lender and see if they can get them to accept a lower sales price in order for you to pay the liens or have the negotiator submit the file to the IRS with the proof that the current seller is insolvent and that there is no equity in the current property and to have the lien follow the seller rather than the property. check out http://www.bestshortsaleadvisor.com for more info
0 votes
Emily Knell, Agent, Huntington Beach, CA
Sun Nov 13, 2011
The federal tax lien MUST be paid OR the seller working with a CPA or the IRS office as mentioned below may be able to work out something with the IRS to allow the sale of the home & to put the lien on the seller PERSONALLY rather than against the house.

The seller needs to tell the IRS, "Look, there ain't any equity for you!!"

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtors
0 votes
Roula Fawaz, Both Buyer And Seller, Irvine, CA
Sun Nov 13, 2011
It is common for homes to have two liens, but a tax lien can add another wrench in the deal. A good and experienced agent can handle this type of short sale. We just closed three short sales one with a federal tax lien. The key is to have a good team that is working together to make it happen, agents, lenders, sellers, buyers and escrow officers. I have to be honest, the process is tough,long and can be frustrating, but if the house is the one you want, then it is worth giving it a shot. Of course nothing is gauranteed in a short sale. You have to take your chanes. Call me to chat in person, I can share more information and answer any additional questions you may have.

Regards

roula fawaz
0 votes
Beau Watkins, Agent, Fullerton, CA
Sun Nov 13, 2011
Dean, U have to decide to b agressive. Insist on negotiating those liens, ur agent is ur go between but remember it is ur $. Ultimately ur greatest power & choice is to walk away.
0 votes
Valerie O'Br…, Agent, Newport Beach, CA
Sun Nov 13, 2011
DEAR DEAN:
I assume you are working with an agent? A good agent has a negotiator who can work with lien reduction. The negotiator is usually a lawyer. Tax liens are a problem because even in a bankruptcy lawyers fees and taxes are never forgiven. The IRS will reduce tax liens but will generally not forgive them. As a buyer I am not sure what your recourse is to reduce that lien without a negotiator . The seller's agent should be willing to explore your options....you now know the tough experience of purchasing a short sale.
I wish you luck. If you have a happy resolution be sure to share it with the community!
Best regards,
Valerie O'Brien
949-478-2892
0 votes
Ron Thomas, Agent, Fresno, CA
Sun Nov 13, 2011
Take the paperwork down to the local IRS office;
I have found them very helpful.

Good luck and may God bless
0 votes
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