Owner of short-sale property owes IRS back taxes......

Hello all,

My wife and I are in the process of trying to close on a short sale property. There are two positions that are owed monies. We just found out today that the owner of said property owes the IRS over $39,000.00 in back taxes. 

Does the IRS have approval control for whether this property goes to final settlement or not?

I believe they will get paid also at the settlement table but one of the creditors is going to get less by the minute. 

The first position has already approved the sale of the property. We are still awaiting approval from the 2nd position bank. 

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Permalink Reply by Short Sale Superstars LLC on January 14, 2014 at 8:29am

Does the IRS have a lien on the property?

If so, the mortgage servicer likely not contribute towards this lien. Whoever is facilitating this transaction will more than likely need to put together a package for the IRS in order for them to review a discharge of the IRS lien. The IRS will only review the lien for a discharge once all lien holder approvals are received, an appraisal, IRS specific forms and some additional documentation.

[email protected]

310-564-6389

Permalink Reply by Frederick Siegele on January 14, 2014 at 8:53am

Brett,

There are no liens against the short sale property.

I believe on the HUD-1 statement that was filled out it states that the IRS will be paid at the settlement table.

 

Permalink Reply by Frederick Siegele on January 14, 2014 at 9:04am

Thank you Brian for your answer and .pdf.

Permalink Reply by Tracy Hatchell on January 14, 2014 at 10:14am

You are getting incorrect answers. Federal IRS tax lien on a short sale will not prevent the short sale from closing. The bank is not going to need to do anything. They will not contribute any how. You as the buyer need to make a decision whether or not you are willing to take the risk to close on a property like this because that lien is going to remain with that property. If you assume the risk I would make sure the seller begins the process now to remove the lien from that property by filing the proper filing with the IRS. Since the IRS knows they can get to the seller no matter where they are in the nation they usually remove it without a problem only it is a timely process and the HUD from the closing has to be given to the IRS to show them the seller made no funds from the sale. However you still take the risk that the IRS may not remove it then you are liable for it later when you sell that house to pay that lien. Seems unfair doesn't it. I close them all the time like this however I usually am the listing agent and I make sure the seller has started that process long before we close and I talk to the IRS myself to ensure they are working on it and explain all the circumstances with that IRS agent. NOw is it is a State tax lien I know here in SC they absolutely will not remove the lien unless it is paid so you cannot close without proof that is has been satisfied,

Permalink Reply by Tracy Hatchell on January 14, 2014 at 11:00am

No Brian, you are incorrect. I have closed many. HAve you? The title company allows or as in my state the attorney closes it.

Permalink Reply by Tracy Hatchell on January 14, 2014 at 11:01am

FEDERAL only. They have to have an actual HUD from the closing to get lien removed so please research before you tell me I am incorrect when I have actually closed these shorts sales. Did you not read my post? If I say I closed it then you are wrong, right??

Permalink Reply by Bryant Tutas on January 14, 2014 at 11:39pm

Hi Brian. I deleted the attachment as it had personal info on it.

Permalink Reply by Frederick Siegele on January 15, 2014 at 2:01am

Tracy,

Did you read my post of 17 hours ago.  There are no liens against the short sale property.

The taxes the seller owes are personal. If there was a lien on the property, it would have shown up

on the title search.

Permalink Reply by Wayne Brooks on January 15, 2014 at 4:14am
Frederick, if there is no IRS Lien on the property, at the time of closing, it is irrelevant. I don't see why it would be on the HUD, and they won't be getting anything from the shorted lenders, unless the lender is allowing the owner to use any incentive monies they are offering to the seller. Still can't see it being on the HUD though.
Permalink Reply by Frederick Siegele on January 15, 2014 at 4:39am

Wayne,

Can you help me understand better what the HUD statement is and why it is necessary in this short sale situation?

If the IRS's name is on the HUD statement, then where will the money come from to pay them?  The first position has already agreed to this sale and most likely will be paid in full what they are owed.  The second position is owed much less than the first position and may get nothing at all. 

Permalink Reply by Janna Rankin Scharf on January 25, 2014 at 11:42am

I have had the IRS release their lean to allow a sale to go forward.  There was no reason for them to block the sale.  We didn't have a 2nd to wrangle with, and I imagine they would be less inclined to release their lien if there were a 2nd that was going to receive some of the proceeds.

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