Can a home be foreclosed when there is an IRS lien on the house?

A homeowner in trouble may be asking: can a home be foreclosed on when IRS lien is on the house? The answer is yes. An IRS lien will not stop a foreclosure from happening. Liens in general do not stop the procedure from moving forward.

What Happens to a Foreclosed Home with an Attached IRS Lien

The IRS has what's called "the right to redeem." This is only available to them and to no other lien holder. What happens is that when the house is sold, the highest bidder can stand to lose the home to the IRS. Here's a break down of the process:

1. The house is sold to a bidder.
2. Now that the house has gone through the sale process, the IRS can move in and exercise the right to redeem within 120 days.
3. If the IRS has used their right, they will then reimburse the purchaser with 6% interest. This gives the buyer their money back, but deprives them of the property.
4. After the IRS has finished the purchase, they will then resell the home at a higher price.
5. Any profit received from the sale will go towards paying off the original lien and any other liens thereafter.

Hire a Lawyer if You're In Trouble

The best way to avoid a foreclosure is to seek legal assistance. A lawyer can go to bat for the homeowner by finding errors on the bank's part. Ultimately they buy time for their clients, giving them an opportunity to try to stay in their home.