Must I Pay Seller's IRS Tax Judgement?
I found a place whose owner has a tax judgement on her, -but nothing is recorded and, at least at the recorder's office. Since the property is clear of any actual liens, could the IRS come after me later, if I buy it with its apparently clear title and the seller doesn't pay them off? I live in a "race to the courthouse" state (first one to record gets the deal), if that matters. Could be a good deal that I could Sub2 with no out of pocket cash.
Has anyone had any experience with this issue? Please? My deal hinges on it, and I haven't found any lawyers who seem comfortable or qualified to give a straight answer., IRS issues seem to confuse them.
If you are making an actual purchase of the property, the IRS can not file a lien on the subject property if the original property owner no long has title and or a financially interest to the subject property.
If you are using a creative strategy by taking title and not clearing your customers encumbrances at the point of purchase the IRS will be able to prove that your customer has a financial interest and therefore be able to file a lien based upon your customers financial interest. This is not normal and in most cases, the IRS will not go this far, but they can.
[addsig]
I'm confused. If there are no other liens how are you going to accept this property "subject to"?
How much is the IRS judgement, how much is the house worth, what is your purchase price?
My guess is that the title company won't insure over the IRS judgement which means that the answer to you question is "yes, the IRS must be paid at the closing."
OK, clarification. There is currently no IRS lien recorded, yet she says she's paying the IRS on $15k of back taxes she owes them. She complied willingly with them, so maybe the IRS never recorded anything? Seems unlikely. There is a mortgage, current balance $72,000, no back payments owed. She needs out to get a loan to finish a new house currently under construction. FMV is $100k (listed on tax rolls at $103k), very clean 1999 3/2 on two acres on the edge of town. It was listed at $105k but not sold due, apparently, to the fact that it's considered a "triple wide" mobile/mfd. home, even though it's well planted/est'd. Some banks won't finance these.
The mortgage is held at a local bank, they said "we don't care who makes the payments" and OK'd a Sub2. But...the interest rate is 10%, the payments are $800, and there's a balloon in a year that would mean a L-O exit strategy would have to quick in and out or I'd be stuck holding the balloon full of debt.
If the IRS issue prevents me from having clear title, it's a deal killer, obviously.
I would caution you that a balloon in 1 year is not enough time, in my opinion, to sell creatively without high risk. Fortunatly most local banks like balloons but will usually extend the balloon and adjust the interest rate to market.
I would have your seller try to extend the balloon payment.
If this can't be accomplished know that there is a high probability that you will have to personally refinance that loan in a years time.
GOOD LUCK