An Overview in Federal Tax Liens

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Kevin Simpson

Kevin Simpson is the ForeclosureListings.com Sales Manager and is responsible for all data that ForeclosureListings.com shares with press companies.

Federal tax liens are at the midst of every action put forth by the IRS Tax Division. If you are representing a client in a lien case, you must have a basic understanding of how federal tax liens arise, the types of properties they are usually attached to, the consequences of these attachments, the period of these liens, their priority over other claims made on the same property and the conditions a lien are typically put under.

Formation of federal tax liens

Liens are impediments that favor one party’s property over another. Federal tax liens arise when taxpayers fail to pay their taxes after the IRS demands it of them. Thus, lien rebates take place and they are effective from their date of assessment until the day that they are paid back; hence, it is not  an unlimited form of help.

Notices for federal tax lien are usually announced publicly. These liens, referred to as ‘secret liens’, can be perfected without a notice filing. Still, filing is important because it ascertains the priority of the IRS over other claims made on the property from purchasers, security-interest holders or judgment creditors.

Benefits of investing in federal tax liens

The benefit of investing in federal tax liens is that you can make a considerable amount of money even if the real estate market is in dire straits. Even though federal tax liens can be quite common, each tax lien has a distinct profit-giving method, which makes them every one of them unique to real estate investors.

Procedure for investing in federal tax liens

Investors can choose two procedures through which to buy federal tax liens: an auction sale of federal tax liens or an over the counter sale of federal tax liens.

Previously, investors seeking to purchase federal tax liens were required to move to different counties in order to participate in auction sales. However, with the advent of the Internet, most counties today have all the information they need about local over-the-counter federal tax lien sales right at their fingertips.

You can search for available federal tax liens from the comfort of your own home through an over the counter method as well. After you have found the information you need, you should go to a local county office and find a list that will be in your best interests.

Partial ownership of the property at the initial stage

However, you should remember that, at the initial stage of applying for federal tax liens, you are not the owner of the property. The current house owner usually has failed to pay the scheduled mortgage payments. Since the property will become foreclosed due to the owner’s failure to pay off their mortgage, you, the lucky investor, will be able to buy the property for a fraction of its original price.

Things to remember while investing in federal tax liens

Although federal tax liens mostly guarantee profit, there are some cases where a property costs only a fraction of the dues owed on the property because it is badly damaged. However, bankruptcy cases can render your property title null and void. In such cases, you should hire a local realtor to guide you through the buying procedure and help you to get a worthy deal.

If you carefully invest in federal tax liens, the profit margin can be exceptional and usually does not cause any harm to the real estate market. For details about federal tax liens in your area, visit us at www.foreclosurelistings.com.