Government Siezed Property Auctions

March 15, 2009

In one of the comments, Seth asks “If a loan balance is owed to the bank on a vehicle seized by the IRS, if you buy that vehicle at auction does the bank lose its lien on the vehicle?”.

Of course, there is a lot of misinformation or at least, a lot of ambiguities in the information, that is the subject of many books and other “information guru” offerings, which try to get consumers to buy their offerings, in the hopes of “How To Get Rich At Auction”.

The short answer to Seth’s question is, “NO!”.

When purchasing seized assets, you are only buying the government’s “interest” or in other words, the government’s portion of “claim to the property”. It does not preempt other claims, such as loans from a mortgage company or lender, which may still be entitled to foreclose for lack of payment.

In the case of the IRS, we can look at their specific regulations and the terms and conditions used for such auctions. You will also note, that the original taxpayer still has the “right of redemption” for 180 days. This means, they can pay you what you paid, plus interest and reclaim their property from you, within 6 months of your purchase. So, don’t run off and sell it too quickly or you may be liable for returning the property to them.

IRS Terms of Sale:
Nature of Title: The right, title and interest of the taxpayer in and to the property is offered for sale subject to any prior valid outstanding mortgages, encumbrances, or other liens in favor of third parties against the taxpayer that are superior to the lien of the United States. All property is offered for sale “where is” and “as is” and without recourse against the United States. No guaranty or condition of any of the property, or its fitness for any use or purpose. No claim will be considered for allowance or adjustment or for rescission of the sale based on failure of the property to conform with any expressed or implied representation.

Title Offered: Only the right, title and interest of the taxpayer in and to the property will be offered for sale. If requested, the Internal Revenue Service will furnish information about possible encumbrances, which may be useful in determining the value of the interest being sold.

IRS Sections regarding the Rights of Sale & Redemption:
Redemption Rights: The rights of redemption, as specified in Internal Revenue Code Section 6337, are quoted as follows:
* Sec. 6337. Redemption of Property.
(a) Before Sale. – Any person whose property has been levied upon shall have the right to pay the amount due, together with the expenses of the proceeding, if any, to the Secretary at any time prior to the sale thereof, and upon such payment the Secretary shall restore such property to him, and all further proceedings in connection with the levy on such property shall cease from the time of such payment.

(b) Redemption of Real Estate After Sale.
(1) Period. – The owners of any real property sold as provided in Section 6335, their heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of such property at any time within 180 days after the sale thereof.

(2) Price. – Such property or tract of property shall be permitted to be redeemed upon payment to the purchaser, or in case he cannot be found in the county in which the property to be redeemed is situated, then to the Secretary, for the use of the purchaser, his heirs, or assigns, the amount paid by such purchaser and interest thereon at the rate of 20 percent per annum.

Section 6339(c). Effect of Junior Encumbrances.
A certificate of sale of personal property given or a deed to real property executed pursuant to section 6338 shall discharge such property from all liens, encumbrances, and titles over which the lien of the United States with respect to which the levy was made had priority.

Iconic House sells for $1

March 13, 2009

Of course, this headline caught my eye and I had to read the story, but figured there had to be a catch. Of course, my intuition was correct. Yes, the house was sold for $1 (and other due consideration, as the deed likely reads), but it is going to cost the new owners $100,000 to have it moved! However, considering the house, they are probably still getting a “good deal” on it. Read about it here:
Iconic House Sells for $1
Or Here:
Iconic NJ beach house ready to sail to NY

Everyone has heard the tales of buying a Mercedes (Jaguar or which ever model was used in the tale) at auction for A STEAL OF A DEAL! Of course, they only hear part of the story… what they don’t hear, is that is was a burned-out car or it was at the bottom of a river and they had to pay to get it dredged out.

While the actual story may not be a “myth”, such things usually reach mythical proportions as the story evolves into those “Buy for Pennies on the Dollar! Go To Auction” books, DVDs, and other such information being offered for sale to unwitting buyers looking for those “STEALS of a Lifetime”.

While you may find some great deals and occasionally someone may get a “steal” on something, most items typically bring what they are worth at an auction. This is the reason that auctions have been used for over two-thousand years (auctions have been traced back to as early as 500 B.C.). Of course, it’s also why the Stock Exchange is the biggest daily auction, as commodities and stocks are sold for their current value. Now, if you bought stock when prices were skyrocketing and it was selling at $50, but now it’s sitting there, selling for only $25, you might be asking yourself one of two questions… 1.) did I pay too much? or 2.) should I buy now? It all depends on which side of the fence you’re sitting. What if you buy it now and the price falls further? Did you get a good deal?

Auctions are the best method to determine the current market value. However, it doesn’t matter what you paid for it or what you think it’s worth, the free market will let you know what it’s actually worth today. So, you may think that if you hold on to it, it will go up in value… well, almost everyone bought newspapers, magazines, etc., when JFK was assassinated, with that same thought. All it means, is there are a lot of old newspapers and magazines collecting dust, somewhere. I probably find at least one or more, at almost every estate I’ve ever cleaned out. So, what do you think they are worth? How much would you pay for another one? What do you consider a “bargain”?