During a California escrow, the preliminary title report reveals a recorded IRS federal tax lien against the seller. The seller acknowledges the lien but insists the debt was satisfied months ago. What is the escrow officer's correct course of action?
Correct Answer
B) Require the seller to obtain a formal IRS Certificate of Release or arrange for the lien to be paid in full from seller proceeds at closing
Under 26 U.S.C. § 6325, an IRS federal tax lien is only legally discharged upon issuance of a Certificate of Release. A seller's verbal or informal claim of payment has no legal effect on the recorded lien. The escrow officer must either obtain the official IRS Certificate of Release or arrange for the lien to be paid from the seller's closing proceeds, after which the IRS issues the release. The title company will not issue a clean CLTA/ALTA policy until the lien is formally extinguished, as it would constitute a cloud on title transferred to the buyer.
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A California escrow officer is preparing for the closing of a residential transaction. Which of the following is NOT a standard item that appears as a debit (charge) to the seller on the closing statement?
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