IRS Liens (Buyer or Seller)
SELLER – IRS liens are paid first before any other liens on the home. If the Seller has an IRS lien on the property, that lien will be paid before any mortgage payoff amount. Too often Sellers are unaware of the fact that the IRS has a lien on the property and may be determining a sale price for the home based only on paying off an existing mortgage. This can quickly become a problem for the Seller if the IRS lien and the mortgage payoff amount exceeds the amount needed from the sale of the home to clear both debts.
In addition, the title company will not close the sale unless all liens on the property have been paid and they are conveying the property to the new owner absent any liens on the home including an IRS lien.
BUYER – This is rare but it is something a Seller should be made aware of. If the Buyer has an outstanding IRS debt, the debt will follow the Buyers in a sense. What this means is when the Buyer enters into a contract for the purchase of a home, the debt will immediately attach to that home in the form of a lien and the Buyer’s IRS debt will need to be paid at closing. If a Buyer is unaware the he/she has to pay the debt before the home closes or at the closing, they may not be prepared for this additional cost at closing and may not be able to close the sale.
IRS liens are always paid first before other liens on a home. For this reason, a lender will not lend on a property if they are in second position to an IRS lien. The title company will also not close a home with any liens on the property. And since the Buyers IRS debt will immediately attach to the home as a lien, the Buyer will have to pay the debt owed to the I R S before the sale can take place.