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Buying a home from a foreign seller and handling ‘FIRPTA’

April 17, 2020
Cape Coral Daily Breeze

Mr. Feichthaler,

I am in the process of buying a home in Cape Coral, and the closing documents presented to me include an 8288, which is an IRS form. I am paying cash. I realize that the seller is from France, and that they have to withhold money from their sale to be paid to the IRS (FIRPTA), but why do I have anything to do with this? Should I sign it?

- Eunice R.

Dear Eunice:

Any time someone is purchasing a property from a foreign owner, special care and consideration is required, every time. When a foreign seller sells real estate, the IRS requires that a certain amount, either 10% or 15% of the gross sales price, be withheld and sent to the IRS at closing. Most people refer to this as "FIRPTA," the acronym for the act that requires the withholding. Although the law firm or title company may be handling this withholding, the IRS says that YOU, the buyer, are ultimately responsible for the collection and payment of this amount! That means if the payment isn't made, or there is a mistake in payment, you, as buyer, could be responsible not only for the withheld payment, but also interest and penalties. It is vital that you confirm that the closing agent, whether a law firm or title company, has experience with foreign sellers. Additional steps may also be necessary, depending on the circumstances. Even before signing the contract, professional advice should be sought when buying from a foreign seller.

I have worked with buyers who purchased property from a German couple where no funds were withheld or sent to the IRS. The IRS placed a lien on their property, and even commenced garnishing their Social Security payments! This is a situation to be avoided, as the costs of making a mistake on a purchase from a foreign seller can be steep.

So, if everything has been prepared properly by the closing agent, the 8288 should be signed. You will want to make sure that, among other things, that they will immediately pay the IRS all amounts owed. Some-times, they may delay payment because the seller has asked for reduced withholding from the IRS. In such situations, documentation should be collected confirming all actions they are taking are all prescribed by law and will not cause you liability.

I wish you the best in your new home!

Eric P. Feichthaler has lived in Cape Coral for over 30 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 18 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator.

Mr. Feichthaler can be reached at eric@capecoralattorney.com, or (239) 542-4733.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.

 
 
 

 

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