I would, at this point, call my own attorney and get the real poo on how to handle this deal. The way my attorney explained it to me, and also the attorney of a home I was negotiating on is that before ANYONE else gets paid off from the sale of a home with tax obligation, Uncle Sammy gets their cut. What is left over then the private mortagers get to use for a recoup. There are various sorts of taxes a home can be subject to, including real estate taxes and assessments. Whatever kind of tax it is, the sellers apparently hope the sale will cover and relieve.

Don't ask us for an answer, ask a real estate legal advisor if you desperately want this particular house. If there is any way at all it can be done, they'll know how.

Are you paying over $200k for the house?

Just curious, how did it get this far without the lien being noticed? Didn't anyone check the title before now?

Thanks for your replies. I have contacted a real estate attorney and will find out from him what options we have. He thinks we will still be able to buy the house and the IRS will garnish the proceeds. The IRS just attached the lien to the title within the last five days, apparently. It was not attached when our loan was processed. It's a little disconcerting to me. I'm glad someone noticed :0 I think they do a title search at the beginning of the loan process and then again just before closing, so hopefully they would have known. I'm a nervous wreck. The house is worth the expense of hiring an attorney to make sure that we don't acquire any additional debt, so maybe this will work out. I'd like to get to the landscaping and decorating phase of home ownership. This is awful!!!

The federal/state government can attach a lien to the property & can foreclose just like a real estate tax lien except they are NOT a priority lien. Therefore, they are subject to any existing mortgages or other liens that have attached to the property prior to the federal lien.

The mortgagor can redemm the property for up to one year after a federal tax sale.

If the property you are trying to buy is foreclosed by the mortgage holder (assuming there is one) then the federal tax lien will be extinguished & you could buy it from the lender's REO inventory. Not a perfect nor even good alternative but it is a possibility if nothing else seems to be working for you.

Real estate taxes are a priority lien.

/t

BTW, real estate tax liens ARE priority liens.

I have looked at homes through real estate agents where they were unaware of liens and taxes on homes. In fact, I informed them there were after doing some searching on my own. In one instance a home I looked at was up for sheriff's sale on a foreclosure and either the agent didn't know it, or didn't want to disclose it. I also bought a home once where a second lien was attached, and it missed the title search done and paid for by my attorney. It was a second mortgage from the bank whom I borrowed for my mortgage and they missed the ball when the house went up for sale and actually they were the ones who couldn't provide me a clean deed so they ate it. Stranger things have happened.

I work with attorneys a lot in buying and selling homes. I don't know why some people are so reluctant to use them. Their fees are often miniscule compared to a real estate nightmare. I also do as much legwork as I can on my own behalf to help them. I once made an offer and signed a contract on a home in the city limits with acreage. Something about it just didn't hit me "right" after the fact. I went back to look at the lay of the land compared to the legal description I bothered to look up and figured I'd either own the house or the land but not both, because there was no way the house sat on the land described. roflmao. It was the tip of the iceberg. I talked to the homeowners nearby and discovered there had always been a flaw on that deed. How on earth it got as far as it did is beyond me. The house was actually located on a vacated parcel and the land behind it. The parcel issue had never been resolved. I asked for a survey and the realtor said he'd pay for it. Ha! When it came back as I suspected, I not only ended up paying for the survey but the attorney fees to be assured I was out of the contract. Small price to pay. That's why I use attorney's up front now.

calliope, off-topic but similar to your post...

That kind of thing is common in NH. We owned two homes there & both had some kind of title issue. One was built in 1848 and the other in 1887. Over time, construction happens & tear downs happen. Not always do surveys happen. So, property boundaries are a mess. On our last home, the neighbor's garage was on our property. Oh well...it had been there for 60+ years. Our fence was 5' onto the north neighbor's property. Again, oh well...

The title insurance companies insurance around such things a lot in New England.

/t

That is a good thing. I just used that as an example of how folks should not be at all complacent about things being "right" because of assumptions a title search had been done. To my knowledge, a search is not done as a matter of course here until closing. They're a relatively expensive process and I wouldn't assume a realtor would do it on properties they list.

I try to work with realtors as business partners. They are in my mind. If you have flaws in properties and deeds they are put in sticky situations they may have no knowledge about. That's why there are so many papers, disclosures and rules involved. It still doesn't stop them from being dragged into suits before their part in it is cleared. The realtor involved in my deal who promised to pay for the survey, and didn't, went out of business. I don't tend to be a game player. I cut to chases in my business dealings and look for realtors who can be as open with me as I am with them. I trust the one I'm using now and working together she saves me a lot of worry and work. But, I still get legal advise when I am not sure about something and I'd hope she would understand it protects both of us.

Ok, "real estate taxes are a priority lien"
Your talking local property taxes right?

Things like sewage assessments aren't usually that much. ......
Mortgage, property taxes, odd end assements, that's all I can think of

So what other Federal or State liens would there be?

Especially at 200K

Yes, that's my question. How on earth do you rack up a $200K tax lien on your property? Thats not a simple math error on your tax return. That's a lot of money. What bothers me so much is that the seller clearly knew about this, yet failed to disclose (he's involved in a divorce and has left the area) and also that, had the lien not been discovered, we would have been an additional $200K in the hole. I think. It's just scary to realize how much you don't know to watch out for. I'm paying a realtor, but in the end, I really need to watch out for myself. I can't wait to talk to the atty tomorrow. I want everything to work out, despite this one huge glitch. We have looked for months and months and this is the only house either of us want to purchase.

Income taxes. Or, the homeowner could be a business owner that hasn't been paying his employee taxes, SS, Medicare, etc. Many possibilities. The appraised value of the property has nothing to do with the amount of federal taxes owed.

Remember though...

Federal taxes are not a priority lien. Real estate taxes (and yes, Mary...sewer & water) are priority liens.

/t

An example of a State lien would be back child support. Or, could be State income taxes. In some States, child support is a priority lien.

/t

Yowsa. Thats just dang terrifying.

So its the title search/research that's supposed to bring all this to light?

I don't suppose there's a way for mere mortals to do this on their own?

Yes, Mary. If you're interested in a property get thyself to town hall. If it ain't recorded...you don't need to worry 'bout it. The older the property the thicker the file! Here in New England, make that plural as in 'files'. lol

A problem inevitably is that somebody neglects to file a Release of Lien. So, one has to do some follow-up work after leaving town hall. It's a lot of work. That's one of the reasons why we have title insurance companies. It's easier to let them do the work & take the risk. :)

But, can you do it yourself? Yes, absolutely & astute individual real estate buyers often do much of the work themselves.

Even an appraiser will do a brief title search (although not as thorough as a title company & an appraiser doesn't guarantee title). They do enough to earn their money though.

/t

Well, I just spoke to my realtor, who spoke to the Title Company. The title company told her that the tax lien would need to be settled first and then the owner of the house would have to find a way to settle with his mortgage company. In other words, the IRS will sieze the house and the owner will owe the mortgage company for the house and we will be out in the cold. In a panic, I called my Real Estate atty, and he said that he wasn't sure and had a call out to a friend in tax law. Holy cow, this is a crazy mess.I wonder if I need a tax atty and not a real estate atty.

Regardless I think if you were in any kind of hurry your out of luck. If you have time, ? months?, you may eventually get your house at some point. Unless your lawyer(s) can make a deal with whoever is owed money?

Triciae strikes again!

The house that borders my backyard has a Federal Tax lien on it to the tune of $798,000. The house is worth, maybe $500,000. The owner was partner to a dentist and they tried to avoid taxes through some scam stuff. Off shore and all that. Its FL after all. Anyway. The dentist died but he was only leasing the property. No written lease you understand. But the owner has tried to say that he wasn't the one avoiding taxes. Sure. While in FL, he owned an aluminum fabrication co. As of this moment, he is a preacher (non-profit, of course) in Indiana I think. Anyway it a mess. My only part in this is to keep the pool filled. Last year it got too low. The pump blew and we had frogs and green slimy water filled with mosquitos. As we speak, there is a for rent sign in the yard. Good luck, dude. If the Feds decide to foreclose, the renter would have the long, expensive task of getting back his/hers furniture and auto if the said auto was in the garage when the foreclosure came down.

Ain't life fun as a spectator???? I'm not getting involved in this!!!!

beachlily, that is not true regarding the renter and a federal tax lien. The IRS does not get any kind of preference because of an income tax lien (other then once they file, very few lien holders that file after them can jump in front of them), even it was the result of a fraudulent filing. They have to go through the same foreclosure proceedings as any other creditor. If the partner truly had a part in the tax fraud I can assure you he would be in jail. The IRS does not simply slap you on the hand and say "pay me when you can and don't do it again" when the numbers get into the six figure range.

What you are referring to is an asset seizure in which the police will take all property they think is linked or obtained from the commission of a crime that allows for asset seizures (usually drug trafficking, theft by deception, etc). Chances are if you are renting a property with a meth lab being run out of the basement, you may lose your property. Typically they will take everything on the premises and then let the owners sort it out. And in this case, it can be very hard to get your property back since the laws typically require them to give back the property only if you are found innocent. To get around this requirement, they simply do not file criminal charges against you. Many times the only way you get your property back is to get them to charge you with a crime.

"It has just been determined that there is a tax lien on the title of the property for $200K. Our realtor tells us that we won't be able to purchase the house without a clear title, so the deal is dead."

Depends on how much equity the seller has in the property. If its over $200k, the deal is not dead, its just that the seller will have $200k less in his pocket than he was counting on.

From the evasive answers you're getting from the realtor, that might not be in the cards though. Basically, the seller needs to be able to sell the house for enough to pay off both the lien and any outstanding loans on the property, without getting into a "short sale" situation.

If the situation does like like a short sale scenario, I'd hire a real estate attorney who specifically has experience in handling that type of transaction, and I'd also try to forget about the purchase happening with any reasonable speed. In fact, I'm not even 100% certain a short sale would be a feasible option - most short sales involve a bank purchasing the house in a sort-of foreclosure sitution, if I'm not mistaken. I know just enough about the subject to be dangerous - I'm not an expert.

This house must be something pretty special. Most buyers just aren't willing to put up with the hassles.

My brother currently has liens on his house related to an addition he had put on last year. The contractor never paid the subcontractors, so several subcontractors put liens against the property to the tune of $40,000. I didn't understand why the subs would go after my brother, who has already paid his money to the contractor; but my brother's attorney said "They cast a wide net and will get the money out of somebody." Scary...

georgiamomma,

Your brother has a Mechanic's Lien filed against his property. Providing the sub-contractor followed proper procedure regarding time-frame, etc. his Mechanic's Lien is a priority lien.

It's a good example of why I always preach that owners get their own Lien Waivers when doing construction. They don't necessarily protect against the filing of a Mechanic's Lien but they do help when you get to court.

/t

My head is so stuffed with new info other stuff keeps falling out!
What is a Lien Waiver?
And is it then better to hire and pay your own subs? Obviously this isn't always feasible but on some smaller jobs like an addition or garage it might be.

Any time you hire a contractor that hires subs (this includes tradesmen and material suppliers), you should get copies of the release of liens from the subs. Normally you do not pay your contractor until you have all subcontractor releases. If the subs work goes across multiple contractor billing tranches, then you should get partial release of liens when ever the subs are paid. Good contractors follow this process and you usually don't even have to ask for the releases. If a contractor ever tells you don't worry about getting releases, I would stay away from them. The reason you hire a contractor is to manage the building process. That management is more then just scheduling tradesmen to show up.

A Lien Waiver is a legal document that basically says a contractor/sub-contractor/material supplier has been paid for all work and/or materials they have done or supplied to the date of the Waiver. 'Waiver' means they are 'waiving' their right to file a lien on the work covered by the Lien Waiver.

I personally don't believe that having the GC get all the Lien Waivers adequately protects a homeowner. For any material (meaning substantial) work done on one of our homes I always get Lien Waivers releasing me from financial obligation not just a copy of the GC's waiver.

Construction and construction lending is a whole 'nother topic.

/tricia

Kitchen, my husband and I keep in contact with the IRS agent assigned to this case. We actually went to the courthouse and got copies of the actual liens. Its complicated, but they are still sorting this out after 18 months. No one has been jailed but no one has been released from liability either. Its something about the slow wheels of justice. The agent said that he has a huge backlog and that is the reason for delaying action in this case. If the IRS goes through the foreclosure proces, however, only the owner in Indiana, not the renter in FL, will deal with the details and thus be aware of the procedures.

Years ago I witnessed an IRS agent boarding up a home that was foreclosed upon due to Federal tax liens. He is the one who told me that anything in the house and garage belongs to the IRS when this happens. It doesn't matter who ownes the stuff. We are not talking meth labs, we are talking tax evasion and the actions taken to collect those taxes, i.e., tax liens.

my husband had purchased a business property that had a tax lien just shy of $200K and it was written in the deal that the buyer would pay the lien plus whatever the sale price was. It took no less than 3 phone calls per day for an entire year. But it was done. If you are truly interested in the property just stay on top of what you need to do to get it. The main reason these tax liens get so out of control is penalties.

I bow to all of the good info here, however at least in the states of California and New York, the go to place for title searches - deeds, mortgages, liens, releases, etc., would be the county recorder/county clerk office.