A tax lien on property or assets is a way the State’s financial institutions claim a debt through execution on such property and assets. In essence, when a tax lien notice is filed, we receive a message through which the government is telling us that it will legally claim these assets as part of tax debt.
That is an advanced enforcement process on our debts. However, some possibilities exist to sell a property with a tax assessment or apply for refinancing.
How to proceed with a tax lien on a property?
In claiming a tax debt, institutions can claim the execution of a property or assets as part (or all) of the debt payment. It would be the final part of a process that will have started with the initial claims for the debt. Subsequently, it will have progressed with a tax lien notice on the property or properties claimed by the IRS.
Given this, there are different options for dealing with the situation. For example, if you have equity in the property, the income equity itself will be used when the closing of the sale takes place. We can use that to pay the tax line. But, when the property is sold for less than the lien amount, it is possible to request the release of that line so that we can finalize the sale. Remember, once the foreclosure has occurred, any action on the property or asset is blocked.
On the other hand, it is also possible that you may request that the federal tax line be kept secondary to the lender’s lien on behalf of yourself or the lender. That would allow refinancing or restructuring of the loan, in this case, for example, a mortgage.
Rarely the lender’s lien does not take priority over the property. Under federal law, mortgages and secured asset loans will always have priority liens after fees and property taxes. These would be the most important lien, and the property is foreclosed for nonpayment if they are not paid.
When the IRS offers to file a federal tax lien on such property or asset, the application to the property would always be secondary to the initial mortgage or loans held in active status.
Another important aspect to remember is that, while possible, refinancing a property with a federal tax lien is complex. In general, few lenders dare to operate in this type of situation. In any case, the mortgage should always be purchased money with existing types of protections.
That is, we will not get a lender if the lien has not been removed, discharged, or, in any event, subordinated.
Can a reduction be applied to the IRS tax lien priority?
Yes, indeed. The institution maintains as a priority line of work to not have tax liens levied on homes that keep refinances or property sales blocked. It is possible to request for secondary tax liens to be executed. Such liens are subordinate to a lender who restructures or refinances the loan.
It would also be possible to handle a cancellation request when the home is sold for less than the full amount of the mortgage lien. That is less common and can only be done under certain circumstances. On the other hand, it should note that the tax lien application or subordination process can take at least one month from applying.
In other words, if a tax lien is subordinated, the government’s lien will become secondary to both the property and the lenders. It should not be forgotten that, without subordination, it will not be very feasible to finance or refinance the property in the future.
In short, this is an option you can do, although, generally, you will have to rely on the presence of lawyers specialized in managing this type of task. It is not a simple option for an ordinary user since it requires legal and bureaucratic procedures that, in some cases, are quite complex.