Finance Tax Time

Buy a home, car, helicopter, NFL team or whatever for one measly dollar. Ah, we must be talking about IRS property auction hype.

The Basics of IRS Property Auctions

You may have seen commercials or advertisements on the web about the steals you can get at IRS property auctions. Whether you can actually get such deals is questionable, but there is no doubt the IRS does hold auctions. The purpose of the auctions is to sell off property of a taxpayer that owes the IRS money. Here are the basics of the auction process.

Perhaps the most interesting thing about IRS auctions is there is no set procedure. With some auctions, you must appear in person to bid. With others, you can mail in a bid. Still others require you to submit a sealed bid. So, how do you know which is which? You need to get a copy of the official notice of the auction. It lays out all the specifics and is binding on the property sale.

The second basic thing to know about IRS property auctions is the payment method. Ironically, the IRS is really into cash. If you intend to bid on a piece of property, you must be prepared to pay in cash, with a cashier’s check or certified bank check. You cannot finance the transaction, pay by personal check or even use a credit card. Again, make sure to review the official notice of auction for payment requirements.

This cash or equivalent attitude stymies many bidders. How can you get a cashier’s check before the auction if you do not know what the winning bid will be? To resolve this, many people will get a check for their minimum bid and then bring cash on top of it to make up the difference between the check and winning bid. Not the smoothest approach, but the IRS accepts this approach.

Finally, most people wish to know if they can get on the IRS mailing list for property auctions. In short, the answer is no. There is no list. While this might make you groan, you should realize it also constitutes the reason you can sometimes get a major deal. If everyone was able to access a mailing list, the auctions would be packed and great deals would not exist!

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While the IRS will auction off just about anything to satisfy a tax bill, seized real estate gets people excited. Here are the basics of IRS real estate auctions you need to know.

Understand IRS Real Estate Auctions

Does the IRS really seize homes and then auction them off? Yes. The seizures occur from wayward taxpayers who never pay their taxes and seizures of crime-inspired purchases such as those from drug dealers and such. Before you run off to bid on these seized homes, however, you want to keep some things in mind.

The first thing to keep in mind is the property is offered as-is. The IRS makes absolutely no guarantees regarding the soundness of the structure, the quality of title and so on. If you win, the IRS simply issues you a quit claim deed to the property and moves on.

The second thing to remember is you have to pay cash for the property. Yes, cash. Okay, you can pay with certified checks, but no financing, personal checks or credit cards are allowed. None! Make sure to read the notice of auction closely to understand what is required of you.

With real estate tax auctions, there is another issue you need to understand. Although you may win the auction, the delinquent taxpayer has the right to buy the property back from you for a period of 180 days. If the taxpayer exercised their option during this redemption period, they must repay you the amount you bid. They also must pay you interest on the bid amount at a rate equal to 20 percent annually. Put in simple terms, you may not actually get the property, but you will make money on your investment. In a majority of cases, the right to redeem is exercised by taxpayers.

If you are considering bidding at IRS real estate auctions, you may want to sit down with a knowledgeable lawyer before hand. Although the IRS is a federal agency, state law controls many of the issues related to title and so on. Every state has particular laws and none of them seem to be the same. If you are not careful, you can end up in a mess instead of a house. In this case, it is truly buyer beware!

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