Asked in Real Estate Law for Texas

Q: If a seller lies and fails to disclose an IRS tax lien on a property is there any recourse for the buyer?

We have been under contract for 4 months now waiting for the IRS / seller to resolve. The seller is now indicating they don't want to extend the contract because it is taking too long. Interest rates have gone up by .5% and the seller has indicated they can relist it and get an additional 30K. Seller lied on the TXR-1406 and did not disclose the lien. It was not discovered until after we were under contract and the Title company was attempting to clear the title.

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1 Lawyer Answer
Fredreck S Hudgens
Fredreck S Hudgens
  • Houston, TX
  • Licensed in Texas

A: If an encumbrance is discovered on the title to the property after opening title, your recourse is to ask the seller to remove the encumbrance, being the lien, cancel the transaction and receive your earnest money refund, or buy the property with the lien in place. Your written contract provides the contractual terms to handle this situation and your remedies. It is unfortunate that this happened, and the seller was most likely aware of the lien. Seller may be able to list the property again for more money if cancelled, but the price is market driven. The lien would not affect the price unless a buyer buys the property with the lien in place which would be done so at a lower price. Your real estate agent and broker should be able to advise you on this issue and work closely with the seller to resolve your issues.

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