Coeur d'Alene Short Sale Q&A ~ Can I short sale my house to avoid foreclosure if I have an IRS tax lien?
I received this question from someone who was trying to decide what their best course of action was to avoid foreclosure:
Our small business failed and as a result we had a lot of business bills that we were personally responsible for. Now we have an IRS tax lien and a judgment filed against our house. We can't afford to pay those debts off right now. We owe more than our house is worth. Is short selling our house to avoid foreclosure even an option?
First of all, let me say that I am not an attorney and can't give legal advice. But I can tell you what has been my experience with this situation.
In general, creditors who have placed a lien against your home will release that lien to allow your short sale to go through with the stipulation that YOU are not receiving any proceeds of the sale. This even holds true for the IRS.
The creditors place the lien on your home for the express purpose of being paid off with your equity if you sell your home before you have paid the debt. If there is no equity above what you owe on your mortgage for them to claim, then it is fruitless for them. They have no interest in blocking your sale just to be mean and vindictive. Yes, even the IRS!
Each creditor will have to issue a release, and this will take some time and diligent effort to make happen. A savvy Realtor working with a sharp escrow officer will be your best friends in this situation.
If you are short selling your home to avoid foreclosure, then you are unquestionably in a situation where you will not receive any proceeds from the sale. This is the perfect environment for creditors to agree to release their liens. This doesn't mean that you don't still owe them on the debt. Just that you can short sell your home to avoid foreclosure.
Please call me if you would like to discuss whether a short sale is a good option for you. Knowledge is power!
Janna Rankin Scharf provides a superior level of real estate services to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com to search for homes in the Coeur d'Alene MLS for anywhere in spectacular North Idaho.
No matter how grand or modest your real estate dreams may be, you can turn to me in confidence. Give me a call today and let me know what I can do to be of service to you!
Janna Rankin Scharf AB, GRI, CSP, CNS, CLHMS 208.651.9700
Great post. You gave comprehensive accurate information without providing legal advice. Superb job!
Janna, that's a wonderfully clear AND helpful reminder for sellers and agents in this crazy market. Impressive packaging.
Janna,
Without sounding like a broken record, good advice. It's not likely the debt will go away but the IRS seems to be a little more understanding these days about releasing liens. When they buy again, they'll probably see the lien attached to their next home if it hasn't been paid off.
BTW aren't you supposed to be on vacation? Take a break would ya!
It may also be possible to pay off the IRS lien from the sale of the home even while doing a short sale . . . depending upon the lender, the negotiating skills of the agent or negotiating firm and the balances on both the home and the lien, I've seen this done successfully.
My first short sale was caused by a IRS lien... bad news.