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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Related Topics & Key Terms
Key Terms:
Related Concepts
Intestate succession is the legal process by which a deceased person's property is distributed according to state law when they die without a valid will. State statutes determine the order of inheritance.
Marketable title is title that is free from reasonable doubt as to who the owner is and free from liens, encumbrances, or defects that would cause a reasonable buyer to hesitate before purchasing. It is also known as merchantable title.
Probate is the legal process by which a deceased person's will is validated by the court and their estate is administered, including the transfer of real property to the named beneficiaries or heirs.
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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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A first-time homebuyer in California asks her agent what 'opening escrow' means. The agent explains that opening escrow refers to: