Legal Question in Real Estate Law in Illinois

The general rule for liens is first in time first in right. Therefore, if the mortgage was the first lien placed on the property, it is first in priority.

The IRS lien priority is determined under applicable state law. The prior answer by Ms. Palmer is correct. Your first mortgage will have priority over a subsequent IRS lien.

However, the IRS does not have to wait until you pay off your mortgage to levy against your house. If you have equity in your home over and above your mortgage amount, determined by using a "quick sale" valuation (approximately 75% of FMV), the IRS can levy on and sell your home, subject to the 1st mortgage.

In order to evaluate your alternatives, you should determine your whole balance sheet, and then consult with an attorney experienced in IRS collection matters to explore what will happen if you do nothing, and what alternatives you have if you act now, including but not limited to negotiating an installment agreement, and/or an offer in compromise, or selling your home before the IRS proceeds.

In addition, it is unlikely you will be able to refinance without taking care of the IRS lien. Obviously, you will not be able to sell without satisfying this lien, or obtaining a release from the IRS.