Strip an IRS Tax Lien Off Short Sale Property
The Internal Revenue Code allows you to petition the IRS to remove its tax lien from short sale property when the government would recover nothing. Contrary to what some believe, an IRS tax lien does not always take priority over a prior secured interest such as the bank’s mortgage. Since in a short sale the lender does not recover the full amount of its lien, the IRS, being second in line, recovers nothing.
Getting the IRS tax lien removed requires the appropriate forms and paperwork. The taxpayer (in this case, the seller) needs to prove that the property is indeed upside down and that he or she will not receive any proceeds from the sale. There are several checklists of documents the IRS uses to make sure these requirements are satisfied.
If the package is submitted properly the IRS will issue what is called a conditional lien release letter. This gives them all parties involved – including title insurers, real estate agents and brokers, investors and the buyer and seller – written assurance that the IRS will not stand in the way of closing. Once the deal is closed, the parties need to submit the final documents, including the newly recorded title and final HUD-1 to make the lien removal permanent.
Contact me if you would like me to evaluate your deal and strip the IRS lien of your short sale property.