Trustee Sale Foreclosures
In my recent MLO classes I asked some questions about Trustee Sale Foreclosures. Even with experienced real estate agents and mortgage loan originators, there is confusion on some items. One is: “What happens when there is an IRS lien on a property and there is a Trustee Sale?”
The IRS lien will be a junior lien because very few lenders will ever make a loan when there is an IRS lien on the property. What happens after the auction?
Status of Junior Liens
If no one shows up to bid when a first forecloses, we know the junior liens are wiped off. But does the IRS lien get wiped off too? Simple answer, yes. However, the government does get one extra perk; they can buy the property back from the lender at the opening bid within 120 days.
If someone shows up and buys the property, the IRS lien is gone and the IRS can buy it back from the winning bidder. They pay the price paid at the auction and do not have to pay for any upgrades made in the 120 days.
The IRS has advertised that they are open to negotiation. However, the chance of them purchasing is remote.
When the IRS lien is removed from this property, the lien is still in effect against the ex-homeowner. Learn the IRS rules. If there is an IRS lien on a property, many investors do not go anywhere near it. You could buy and then just wait 120 days to do any work, might find some better prices.
For more information go to California Civil Codes 2923-2924 etal.