How do IRS liens affect home foreclosure?

To begin with, can a home be foreclosed on when IRS lien is on the house? The answer is yes. It will not matter to the creditor that there is a tax lien on the house. The foreclosure will proceed as usual with the lien on the property.

What Happens to a Home with an IRS Lien in Foreclosure

The lien will stay on the house throughout the process. It will still be there once the original owner has moved out and the home is put up for sale. Once the house is sold, the IRS has 120 days to exercise their right of redemption. Right of redemption or right to redeem is where the IRS can purchase the home for the amount that the buyer bought it for. In other words, the purchaser can be out of luck and lose the property to the IRS. Now the IRS can turn around and sell it themselves in order to satisfy their lien.

No other lien holder has this ability. For example, if there are multiple liens on the property and one of them belongs to the IRS, the IRS's claim trumps all others. Liens are usually satisfied in the order that they were placed on the home. However, an IRS lien, even though it may be lien number 8, jumps to the head of the line in the sale after foreclosure.

Hiring an Attorney

If you're concerned about how liens will affect you after a foreclosure, contact a lawyer. A situation like this takes a professional with experience in this area to advise you on what will happen. Hiring a lawyer to advise and protect your interests is the best choice to make.