YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(Real questions sent to us – verbatim!)
I represent a Seller in a transaction in which the Seller is a foreigner. The sales price is $650,000 and according to your article, the withholding should be 10% because the sales price is under $1 million. Why is the escrow asking to hold 15% instead?
There are two reasons in which the escrow is holding 15%.
First and most important reason: the Buyer cannot or will not sign and deliver to Escrow a “Buyer’s Affidavit” stating that they are (1) individuals and, (2) they will use the property as their primary residence for at least fifty percent (50%) of the time the property is used by any person during each of the first two years following the closing date.
Regardless of the sales price, if the Buyer’s Affidavit is not signed and given to Escrow, the withholding automatically will be at 15%.
This particularly applies to vacant land and commercial property.
Second reason: the Escrow Officer is inexperienced and does not know how to handle the IRS required withholding. I would recommend you ask them the reason why.
For agents who are handling foreign Sellers, this is a reminder that under the Foreign Investment in Real Property Act (FIRPTA) withholding, for any transaction under $1 million dollars, the Buyers do have to “cooperate” with the Seller and turn in their Buyer’s Affidavit so that the lower percentage – 10% – is withheld from Seller’s proceeds. If not, it will be the maximum 15%.
If the Buyer IS NOT an individual, but is a corporate entity – corporation or LLC – they can’t sign this Buyer’s Affidavit, even if they plan to occupy the property as a principal residence. The 15% is then automatic.
If you have questions, feel free to check out my two articles and videos in the link below. It may be a little long, but there is no short changing the subject when it is a little complicated.
~ Quote of the Month ~
(For those of you who know I celebrated my hallmark 70th birthday recently, the following is an apt description of me)
“My mind is like an internet browser. At least 18 open tabs, 3 of them are frozen, and I have no clue where the music is coming from.”
~ Video of the Month ~
For old fogies (like me) who like cruising
My Educational Offering for the Month
When the FIRPTA Withholding goes wrong!
You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
The opinions expressed in this blog are solely the author’s.
Your comments and viewpoints are always welcome.
Info @ VivaEscrow.com