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IRS tax liens are claims that are attached to a property by the government in order to settle a debt for taxes that have been unpaid. If a person does not pay their taxes and owns a home or land, the IRS can issue a lien on the home. This is one of the reasons it is so important to make sure property has a clear title when making a real estate transaction. If you are buying a home or property, it is necessary to check public records to ensure it is free from any liens from the IRS or any other entity. If there is a lien on the property, the difference between IRS tax liens and other forms of personal debt is that the lien stays with the property. What this means for real estate is that if someone purchases the property without first having the lien cleared, the new owner is responsible for payment of the lien. It does not matter that the new owner is not the one who incurred the obligation to the government. Because the home or property now belongs to the new owner, the debt is absorbed by the owner. It can be highly risky to take on such an obligation. Generally, though, title records are researched prior to the transfer of property ownership. If there is a lien on the property, the debt is taken care of during the closing of the sale before ownership is transferred in order to clear the title. During the closing, the debt to the original mortgage company will be cleared and any liens will also be deducted. If there is any profit left over from the sale of the home or property, the seller will retain the profit. If IRS tax liens are not paid off in a reasonable amount of time, the property can be seized by the government and foreclosure proceedings can be initiated. If foreclosure occurs due to IRS tax liens, real estate can be purchased by outside buyers in order to satisfy the debt. However, just as in any foreclosure, any lien junior to the filing of the IRS tax lien will be extinguished. However, any senior lien will remain intact. This is the main reason why IRS tax lien foreclosures can be risky — and not as profitable as they may first appear.
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