I am listing a property for a seller who is not a US taxpayer; what should I do to prepare the seller for closing?

As a general rule, the sale of U.S. real property by a foreign person is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. Recent federal tax legislation increased the FIRPTA withholding rate from 10% to 15%.

Below are the guidelines regarding the amount of withholding and when / if withholding may be avoided all together:

  • If the sales price is $300,000 or less and the property will be used by the buyer as a residence (as provided for in the current regulations), no sums need be withheld or remitted.
  • If the amount realized exceeds $300,000 but does not exceed $1,000,000 and the property will be used by the buyer as a residence then the withholding rate is 10% on the sale price.
  • If the amount realized exceeds $1,000,000, then the withholding rate is 15% of the sales price.

The best advice a real estate agent can give to a foreign seller is to obtain the advice of a US CPA and a real estate attorney.

You can prepare the seller by asking them to obtain the following items:

  1. HUD statements (original purchase and sale)
  2. Warranty deed
  3. Sales contract
  4. Legal description of the property
  5. Social security number or EIN of buyer
  6. Foreign address and social security number or EIN of seller(s)
  7. Withholding agent name and federal tax ID (if different from buyer)