A Warning About the IRS and buying Auction Properties.

An interesting issue occurred today pertaining to an IRS Lien and a property bought at the Trustee Sale that I wanted to share with you.

As you know, when an IRS Lien is recorded against the owner you have to hold the property for 120 days before we can insure a subsequent transaction, and you can flip it. Alternatively, we can request a Waiver of Right of Redemption from the IRS. In this situation, the investor requested that we pursue the Waiver and then proceeded to market the property anticipating the Waiver would be forthcoming. The property was sold and escrow was opened. Here is the problem... Based on our request for a Waiver, the IRS researched the property, checked the listing amount and has requested a copy of the contract. Because this particular property has a pretty good margin, the IRS either wants a cut of the profit or they will redeem the property; they want an offer for the Waiver! You may want to consider that if the property has a particularly high margin that is alluring to you, it may also be alluring to the IRS, especially when they can review the listing online that illustrates they can easily recover a good portion of their lien, if not all... In some situations, it may be better to wait the 120 days, keep the property off the MLS and not incite the IRS.