Vehicle with encumbrances
06-12-2017, 05:51 PM
#1
Race Director
Thread Starter
Vehicle with encumbrances
So just browsing fed bid, ran across this:
https://www.treasury.gov/auctions/ir..._auto_8768.htm
If you click the "notice of encumbrances", it has a list a bazillion miles long. . .
First, I am in no way interested in bidding on this vehicle.
From a curiosity standpoint, how does something like that work? If you win the bid, do you then need to pay off all the encumbrances before you can title/register the vehicle?
https://www.treasury.gov/auctions/ir..._auto_8768.htm
If you click the "notice of encumbrances", it has a list a bazillion miles long. . .
First, I am in no way interested in bidding on this vehicle.
From a curiosity standpoint, how does something like that work? If you win the bid, do you then need to pay off all the encumbrances before you can title/register the vehicle?
06-12-2017, 06:07 PM
#3
Instructor
from the FAQ:
What is an encumbrance?
An encumbrance is something that attaches to the asset, be it a loan on a car, a mortgage on a house, a judgment or a tax lien. For each sale, the auctioneer creates a Notice of Encumbrances (Form 2434-B) which lists out what possible encumbrances were found during our research. While we can not guarantee its accuracy, it is a good faith search in an effort to provide the bidder with the information.
What happens to the encumbrances or liens (IRS, etc.), if I am the successful bidder?
Any encumbrance that is recorded prior to the IRS Tax Lien remains upon the property and must be dealt with by the purchaser at an Internal Revenue Service seized property sale. The encumbrances that are recorded after the IRS Federal Tax Lien are discharged from the property upon the issuance of a certificate of sale or, in the case of real property, a deed to the property. The IRS Federal Tax Lien is discharged from the particular property sold at the same time.
What is an encumbrance?
An encumbrance is something that attaches to the asset, be it a loan on a car, a mortgage on a house, a judgment or a tax lien. For each sale, the auctioneer creates a Notice of Encumbrances (Form 2434-B) which lists out what possible encumbrances were found during our research. While we can not guarantee its accuracy, it is a good faith search in an effort to provide the bidder with the information.
What happens to the encumbrances or liens (IRS, etc.), if I am the successful bidder?
Any encumbrance that is recorded prior to the IRS Tax Lien remains upon the property and must be dealt with by the purchaser at an Internal Revenue Service seized property sale. The encumbrances that are recorded after the IRS Federal Tax Lien are discharged from the property upon the issuance of a certificate of sale or, in the case of real property, a deed to the property. The IRS Federal Tax Lien is discharged from the particular property sold at the same time.
06-12-2017, 06:21 PM
#4
Race Director
Thread Starter
from the FAQ:
What is an encumbrance?
An encumbrance is something that attaches to the asset, be it a loan on a car, a mortgage on a house, a judgment or a tax lien. For each sale, the auctioneer creates a Notice of Encumbrances (Form 2434-B) which lists out what possible encumbrances were found during our research. While we can not guarantee its accuracy, it is a good faith search in an effort to provide the bidder with the information.
What happens to the encumbrances or liens (IRS, etc.), if I am the successful bidder?
Any encumbrance that is recorded prior to the IRS Tax Lien remains upon the property and must be dealt with by the purchaser at an Internal Revenue Service seized property sale. The encumbrances that are recorded after the IRS Federal Tax Lien are discharged from the property upon the issuance of a certificate of sale or, in the case of real property, a deed to the property. The IRS Federal Tax Lien is discharged from the particular property sold at the same time.
What is an encumbrance?
An encumbrance is something that attaches to the asset, be it a loan on a car, a mortgage on a house, a judgment or a tax lien. For each sale, the auctioneer creates a Notice of Encumbrances (Form 2434-B) which lists out what possible encumbrances were found during our research. While we can not guarantee its accuracy, it is a good faith search in an effort to provide the bidder with the information.
What happens to the encumbrances or liens (IRS, etc.), if I am the successful bidder?
Any encumbrance that is recorded prior to the IRS Tax Lien remains upon the property and must be dealt with by the purchaser at an Internal Revenue Service seized property sale. The encumbrances that are recorded after the IRS Federal Tax Lien are discharged from the property upon the issuance of a certificate of sale or, in the case of real property, a deed to the property. The IRS Federal Tax Lien is discharged from the particular property sold at the same time.
lol
06-12-2017, 06:35 PM
#6
Melting Slicks
My guess, is that whatever the car sells for at auction is deducted from the total tax debt and the debtor will owe the balance to the IRS, otherwise nothing would ever sell.
06-12-2017, 06:52 PM
#9
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06-12-2017, 07:04 PM
#10
Melting Slicks
Incentive depends on the type of encumbrance/lien.
For the illustration, lets say someone had a really good year, bought a Z06, paid in full in cash.
Something happens, and they go broke.
Meanwhile, they put the car in the shop.
The bill is 2k. THey dont have the money to pay it.
The shop can put a lien against the title (and) they do not have to release the car until the debt is paid.
If the owner then abandons the car, or the time limit to pay off the debt isn't met, then the shop can sell it for the cost of the repair.
At which point, a buyer can get a Z06 for the cost of the repair, which was 2k.
(Not that any shop would sell a car like that a that cheap, but you get the idea)
Forclosed houses work the same way, as do repos.
.
The balance on the bank note is usually less than value - the bank isn't looking for value, they are looking to recover their principle.
PRoblem comes in when the owner uses the vehicle as collateral against multiple loans, then skips out. That's probably how they vehicle in question got to 400k in liens.
Now think about payday lenders. Their MO is a loan guaranteed by a pink slip.
The high interest rate over short term loan means payday lenders own lots of cars, or lots of cars with lots of liens.....default, the car is repo'ed, then the payday lender sells it for the amount they have loaned out - possibly well below retail.
And those types of deals are the incentive for buying encumbered property.
For the illustration, lets say someone had a really good year, bought a Z06, paid in full in cash.
Something happens, and they go broke.
Meanwhile, they put the car in the shop.
The bill is 2k. THey dont have the money to pay it.
The shop can put a lien against the title (and) they do not have to release the car until the debt is paid.
If the owner then abandons the car, or the time limit to pay off the debt isn't met, then the shop can sell it for the cost of the repair.
At which point, a buyer can get a Z06 for the cost of the repair, which was 2k.
(Not that any shop would sell a car like that a that cheap, but you get the idea)
Forclosed houses work the same way, as do repos.
.
The balance on the bank note is usually less than value - the bank isn't looking for value, they are looking to recover their principle.
PRoblem comes in when the owner uses the vehicle as collateral against multiple loans, then skips out. That's probably how they vehicle in question got to 400k in liens.
Now think about payday lenders. Their MO is a loan guaranteed by a pink slip.
The high interest rate over short term loan means payday lenders own lots of cars, or lots of cars with lots of liens.....default, the car is repo'ed, then the payday lender sells it for the amount they have loaned out - possibly well below retail.
And those types of deals are the incentive for buying encumbered property.
06-12-2017, 07:05 PM
#11
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I agree. It seems that common sense (which is nowhere near as common as we would wish, especially where the government is concerned) would tell us that the Corvette is being sold for as much money as they can get for it, the proceeds to be deducted from the $406K that the debtor owes. The Corvette buyer will not be responsible for the original debtor's total amount. The purchaser is buying a seized asset from a creditor.
I still wouldn't touch it. What are the odds that an individual this irresponsible with their finances took good care of the Corvette?
I still wouldn't touch it. What are the odds that an individual this irresponsible with their finances took good care of the Corvette?