Transcript:
Hey there, it’s Casey Denman from TaxSaleAcademy.com and thanks so much for joining me for today’s video. Today we’ll be talking about tax sales and IRS liens. Before we get to the topic though, if you are looking to learn about the tax sale business, don’t forget to hit that red subscribe button that way you don’t miss out on future tax sale training videos.
Alright, so let’s discuss tax foreclosed real estate and IRS liens now. I’m not going to get into all the details, I’ve got plenty of videos for that, but a tax sale is when a property owner fails to pay the taxes on time, then they eventually lose the property when a tax lien investor forecloses the lien or when a tax deed investor buys the property at a tax sale.
During this process, many other liens are extinguished provided they receive proper notice. Here’s what that means: While the property is going through tax foreclosure, that’s property tax foreclosure, notices are sent to all interested parties which includes lienholders such as mortgages, mechanic’s liens, that kind of stuff. So if the property owner forgot to pay the plumber, and the plumber placed a $5,000 lien against the property, the plumber is notified of the tax foreclosure during the foreclosure process. The plumber could pay the taxes off to keep his lien valid, or most commonly, he would simply have his lien extinguished during the foreclosure. Same goes for mortgages, the mortgage would be extinguished during tax foreclosure.
These are private parties, however. Governmental liens are completely different. The government won’t foreclose out their own liens. That’d be counterproductive. So most governmental liens will stick.
This includes liens of even higher prior than your local government which are IRS liens. Of course, these are liens against a person that has failed to pay their taxes, which attached to any property that they own. And you can perform a public records search to determine whether or not the property you’re interested has an IRS lien attached to it.
Now, when it comes to IRS liens, they are not automatically extinguished. They will actually remain after the sale of the property for a set period of time. Provided they received proper notice during the foreclosure process, the IRS has 120 days after the sale to stake a claim to the property. When they do this, they will reimburse you your purchase price, plus interest, you’ll lose all claim to the property and they’ll seize the property.
So, if a property at a tax sale has an IRS lien you will not be able to get title insurance or have indisputed ownership until that 120 period has expired OR until you decide you want to be nice and pay off the IRS debt that the former owner of the property had racked up. Of course, you probably just want to wait for the 120 day period.
Now, with that said, this is something that intimidates many people. They feel that the IRS is going to swoop in and take whatever property they’ve purchased. When it comes to asset seizure, the IRS certainly has the authority to seize and resell real estate. But we also have to be very aware of the value of our properties. Keep in mind that there are expenses and time involved that the IRS must incur in order to seize and sell real estate. That $500 lot you bought probably won’t be at the top of their list for asset seizure. That rare $1m mansion you bought at a tax sale, just might be their top target, however.
The fact is that IRS liens on tax sale properties really aren’t that big of a deal if you know what you’re getting yourself into from the start. The primary difference of course is that extra four month holding period along with the possibility that they come in and take the investment property you purchased, with reimbursement and interest of course. So it’s not all bad.
Now obviously, if you need to resell a property within a day or you just don’t have the ability to hold an investment for four months, then you probably need to skip over the properties with IRS liens. Otherwise, they’re not that big of a deal!
I truly hope that today’s video has helped you. If we can provide any additional help, there are a bunch of helpful links down below in the video description. One of those links will take you to our primary site at TaxSaleAcademy.com where you can grab a free copy of our book if you’ll just cover the nominal shipping cost, or you can join the academy for our most advanced step by step training.
Take care and make it a successful day. See ya!