It is not everyone's favorite government agency, and most people, most of the time, want as little as possible to do with it.
But on June 28, the Internal Revenue Service will make it possible for a handful of people to pick up residential properties in Orange County at what may be bargain-basement prices.
The IRS is holding a public auction of 18 properties--ranging from a multimillion-dollar oceanfront home on Lido Island to a 1,450-square-foot condominium in Buena Park--that have been seized from people who owe back taxes.
It is only the second large public auction held by the IRS in Orange County. And to avoid some of the problems that cropped up at the first one in March, the agency is conducting a pre-auction seminar on Tuesday.
Both the seminar and the auction will be held at the Santa Ana Police Department Annex auditorium, 23 Civic Center Drive.
"The first time we packaged a bunch of properties for a mass auction like this, we had 209 registered bidders," said IRS spokeswoman Sally Ruhnau. "A lot of them were first-timers, and they had a lot of questions and it took a long time to get through it."
Among the information to be covered at the seminar, Ruhnau said, are the mechanics of the auction, tips on checking out the properties and rules of the game.
Those rules are pretty important.
For example, the IRS doesn't guarantee that the property is vacant, and the successful bidder is responsible for any evicting that must be done.
In several cases, only one owner's interest in a jointly owned property is being auctioned. The successful bidders for those properties will own only a percentage of the homes (usually half), and others--a spouse or a business partner--will retain ownership of the rest. It is helpful in that case for prospective bidders to make a pre-auction arrangement with the other party, Ruhnau said.
One important rule is that while the winning bidder is not responsible for taxes owned to the IRS, he or she does assume responsibility for all other liens and mortgages against the property. But those bills should be factored into the bid, Ruhnau said.
For example, one of the properties to be auctioned is in an area where comparable homes sell for $400,000 or more. In addition to the IRS lien on the property--which bidders don't have to worry about and which isn't disclosed--there are two mortgages with a total balance of $247,758, plus a California Franchise Tax Board lien of $10,342 and two lawsuit judgments totaling $90,163.
That adds up to a total debt of $348,263 that the successful bidder will have to pay off. An interested bidder should subtract at least that much from the market value in figuring how much to offer for the house, Ruhnau advised.
To identify existing mortgages and liens, she said, the IRS runs a title search and publishes the results but does not guarantee the accuracy of the search.
"So we will teach people how to do their own title search as well," IRS spokeswoman Judith Golden said.
One other rule that is nice to know: the debtor, by law, can buy the property back up to 180 days from the date of the auction by repaying the successful bidder the price paid at auction, plus 20% annual interest and all other costs incurred by the bidder.
The IRS obtains the homes in seizure actions against people who have not paid back-tax bills.
Most IRS tax liens don't result in seizures, Ruhnau said. But some people who get into tax trouble have borrowed so much against their homes that even in Southern California's strong real estate market they cannot clear enough by selling the properties to pay off all their debts and the IRS as well.
That, she said, is when they let the IRS seize the property and sell it to help pay back taxes.
In the March auction, Golden said, winning bids for the 20 properties offered ranged from $30,000 to $200,000. She said the IRS sets a minimum bid that is based in part on the market value of the property, less liens and mortgages.
Winning bidders at the June 28 auction are required to make at 20% down payment that same day and must pay the balance by 1 p.m. July 5, Ruhnau said.
The auction itself will begin at 11 a.m., but bidder registration begins at 9:30.
Photographs and physical descriptions of the properties to be auctioned are posted in the lobbies of the IRS offices at the Federal Building in the Santa Ana Civic Center and at the Chet Holifield Federal Building in Laguna Niguel, she said.
PROPERTIES TO BE AUCTIONED
Properties in the June 28 Internal Revenue Service auction in Santa Ana.
BIG BEAR LAKE
42713 Moonridge Road. Triplex, 2,028 sq. ft. Each unit has 2 bedrooms and 1 bath.
8901 Los Altos Drive. 1,450 sq. ft., 3 bedrooms, 1.5 baths.
8111 Taylor Ave. 1,124 sq. ft., 3 bedrooms, 2 bathrooms (partial interest).
466 Canyon Acres. 800 sq. ft., 2 bedrooms, 1 bath.
25452 Champlain Road. 1,653 sq. ft., 4 bedrooms, 2 baths.
531 Ronwood St. 2 bedrooms, 1 bath (partial interest).
LEMON HEIGHTS (unincorporated area)
2261 Liane Lane. Vacant lot on cul-de-sac.
22732 Via Tercero. 1,500 sq. ft., 4 bedrooms, 2 baths.
609 Via Lido Soud. 5,180 sq. ft., with beach, dock and pier, 6 bedrooms, 5 bathrooms.
NORTH TUSTIN (unincorporated area)
11842 Red Hill Ave., 6,008 sq. ft., 5 bedrooms,. 4.5 baths, with pool and tennis court.
374 Shattuck Place, 1,600 sq. ft., 4 bedrooms, 2 baths.
2135 E. Locust Ave. 1,615 sq. ft., 3 bedrooms, 2 baths (partial interest).
6321 Rocking Horse Way. 2,582 sq. ft., 4 bedrooms, 2.5 baths.
SAN JUAN CAPISTRANO
25611 Dana Mesa Drive
27552 Calle San Remo.
629 S. Deming St. 1,846 sq. ft., 4 bedrooms, 2 baths (partial interest).
SOLANA BEACH (San Diego County).
941 San Lorenzo Court.
14101 Charloma Drive. 1,516 sq. ft., 4 bedrooms, 2 baths (partial interest).
Source: Internal Revenue Service Collections Division, Laguna Niguel district office.