Finding my first IRS Lien

Finding my first IRS lien

Jason Cochard for Land Academy

Sometimes I think we have an unfair advantage with our access to industry heavyweight tools like RealQuest Pro and TitlePro24/7. Actually, in a recent meeting with a title company executive, she mentioned that they use the same tools in their title searches that I use in my own. That made me realize that I had some pretty powerful tools. Not having had any real estate experience before embarking on this land investing adventure, I was just taking it for granted that these tools were adequate for doing the job.

But recently, I surprised myself, I found an IRS lien on a property for the first time. Well, it wasn’t on the property, but on the property owner and his wife.

Initially I checked the parcel boundaries and confirmed ownership after he expressed interest in selling. It was a 2000 square foot lot in upstate New York, and my hope was to be able to buy it and give it away on YouTube, in order to build my channel viewership (search YouTube for LandCycler). After contacting the seller, I found that he was prepared to sell at a price of $200. I asked him why he was selling. He said he didn’t have any use for it, and just wanted it off his books. I told him I’d do some due diligence and check taxes and then give him some instructions. He assured me that the taxes were all paid.

The first thing I did was to check the county website for the tax payment history. Yes, the taxes were paid, but I noted an odd thing: a couple of years prior, the taxes had gone from over $200/year to $8/year. At first, because I had already planned to give it away, I thought it wasn’t really indicative of something I should care about. Yeah, it probably underwent a zoning change where you couldn’t build anymore, but I wouldn’t be building.

Second, I checked liens, and it all came up empty. No liens or mortgages. I gave the seller some instructions, saying I’d send a deed that he would sign and notarize and send to me. I’d e-record it, and upon confirmation of recording I would Venmo him the $200. It seemed very risky on his end, but I was testing to see whether the value being so low would cause him to agree. He agreed.

Then, as I was working on the deed, I started to add up the recording fees & taxes, I noticed that it was going to be more than the purchase price just to transfer the property. That got me to the point that maybe it was going to cost too much to acquire this free giveaway property, and instead, I should do a little more homework. So, I shelved the property for a week or two, to concentrate on other deals.

Then the seller sent me a really urgent sounding reminder email, in red, bold letters, asking whether we are still doing the deal. I had just had a meeting with a title agent that day, who alerted me to a few things I didn’t know previously, and I started to do some full text searches of the real estate records — I didn’t want to rely on a lien report, I wanted to read every document this seller had ever recorded.

After searching in the county that the property resided, and finding nothing, I punched in the state and county of his mailing address, and hit search again. Bingo! Up popped an IRS lien for $55,000+ in back income taxes, recorded in the county the seller lives in full time, giving the IRS the first right of redemption to any property owned by the seller at the time of the lien filing. Anything he sells me wouldn’t really be marketable, and even though I had planned on giving it away for free, I didn’t want the potential future headache of having to even remotely deal with the IRS.

I replied that I wouldn’t be able to complete the deal until a recorded document exists that shows the IRS lien was released. After that I haven’t heard anything from him in the way of urgent reminders to close.