Legal Question in Real Estate Law in Washington

I found a for sale by owner piece of property. I contacted the owner and ask if they would be willing to do a contract for deed with me. I offered 25K for the land, 2500 down, at 5% for 5 years. I met the lady at a local restaurant and she had the contracts already with her which was the first sign to me that something wasn't right. We don't know each other from eve. She agreed to my terms but at the end of the payment period, she wanted to "gift" me the land so she didn't have to pay taxes and so the income didn't affect her social security disability. She also wanted me tmake my payment checks out to her boyfriend so SSD wouldn't find out about it. Second, third and fourth light bulbs going off in my head. She claimed she had been to the courthouse the day before to make sure she had the title free and clear and she claimed she did. Something was telling me wait and I told her we had to wait until we got our taxes back then we would finalize the deal. The next day, I called the county and found out there are 3 liens on her property. One from 2003 for 15K from the IRS, and two more liens from the Home Owners Association the property is located in for about 5K.

The property is worth about 25K and I don't mind paying what it is worth. What I do mind is someone trying to rip me off so I don't think anything is wrong with legally getting back at her. She is the property owner. The home owner association president identified her.

How can I buy that house and get out of paying the IRS lien? I want her to pay her own bills.

I was right to wait. So, she blatently tried to rip me off. I get that. There are people out there who will sell their own mother's for a buck. What I want to do now is offer her 2500 total for the property. Ideally, I'd like to settle with the IRS for a much smaller amount and have them keep going after her for the rest. The home owners association will let me pay out what is owed and will even reduce the amount by removing the late fees and penalties but this thief of an owner doesn't need to know that.

I don't know how the IRS liens work. If I buy this land am I responsible for the entire lien? Can the IRS still go after her for the amount as well?

I've already spoken to the HOA. They are willing, in writing, to settle with me. I'm just wondering if I go ahead and get her to sell to me for 2500 or so, will the IRS immediately come after me and demand I pay in full or confiscate the property altogether? Does it make any difference knowing that I also am on SSD so could the IRS even come after me?

1 hour ago


Asked on 1/30/11, 6:18 pm

1 Answer from Attorneys
Amir John Showrai The Pacific Law Firm, PLLC

The title to the property will not transfer until the liens are paid off. You may be able to convince the IRS to let you take over her tax debt, so that title can pass to you, with the IRS as a lienholder. While I am not a tax attorney, I hear it is not so easy to get the IRS to take huge reductions, but it also depends on your income.

The way it normally works when selling a property with liens is for the bank to fund a loan, and the principle goes to the lienholders until they are satisfied, and the remainder goes to the seller. Here, since you want to do a land sales contract, if I were you, I would insist that you be allowed to pay off the HOA, at whatever negotiated price you come to with them, and then the IRS, at whatever negotiated settlement you and the seller can agree to with the IRS. Since title does not pass to you until you have paid off the entire loan, you need to record your contract, in case she tries to sell it out from under you, so that other potential buyers would see what's happening.

After the IRS and HOA and any other lienholders (property taxes is one that comes to mind), then the balance of the payments would go to the seller. Let me also say that you are going to want an attorney to write up this contract for you, to make it as air tight as possible, given the shifty nature of the seller.

Having written all that, knowing what you know about this seller, that she is more than a woman who has fallen on hard times, but is also someone willing to bilk the first sucker that comes her way, I would not make this deal. Walk away. There are other good deals with good people. Sometimes, if it looks too good to be true, it's because it is.

You would be better off getting a conventional loan to buy this property and paying her, the HOA, and the IRS off in one fell swoop, than to get into a land sales contract with her. That way you at least prevent her from further encumbering the property, as I bet she would, even though you'd have a contract that does not all for this.

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Answered on 2/09/11, 2:02 pm


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