Home Selling in Orlando>Question Details

John Webster, Home Seller in Outside U.S.

FIRPTA ISSUE FOR OVERSEAS SELLER

Asked by John Webster, Outside U.S. Thu Apr 19, 2012

I am an overseas seller. I instructed an agent and found a buyer. I signed the (standard)contract sent to me. The realtor never mentioned anything about FIRPTA, which I was totally unaware of. About 2 weeks after the contract was signed the realtor said there was no withholding under FIRPTA and I enquired what FIRPTA was. I have now been informed that the buyer does not intend to use the house 6 months a year (and hence there is no exemption) and there is a withholding, despite the fact the I am selling at a loss.

At no time did my realtor tell me anything about FIRPTA until 2 weeks after the contract had been signed, they did not make any enquiry until after the contract had been signed.

I need all the money out as I now have other commitments and had I been aware of a witholding I would not have sold to these buyers.Does anybody have any suggestions what I can to to avoid the withholding and what can I do about the realtor's failures.

Help the community by answering this question:

Answers

12
Neil Ogg’s answer
I am in a similar situation. I have owned a Florida condo, (which we are in the process of selling), with my wife for over 10 years and as non-resident Aliens, have ITINs and have always filed tax returns. I was aware of the FIRPTA legislation and assumed its purpose was to avoid tax avoidance by non-US citizens. As there has always been a loss on the condo, I assumed no capital gains tax would be due, and obtaining a Withholding Certificate via Form 8288B, or an affadavit certifying FIRTA was not payable, (the sales price is below $300K), would be straightforward. In fact it has become a nightmare.

FIRPTA is administered by IRS, Ogden which cannot be contacted by telephone or email for advice. IRS Philadelphia is totally unhelpful. The affadavit avoiding FIRPTA retention requires the buyer to certify they will use the condo for 50% of the time. Why this has any bearing is unclear. I have complained to the Treasury Inspector General for Tax Administration, (TIGTA), who can at least be contacted by email. This whole situation is a disgrace and is a major deterrent to non-US buyers of real estate.
0 votes Thank Flag Link Fri Mar 29, 2013
Thanks for your response John. My realtor, (a fellow Brit), was aware of the FIRPTA situation as was I. I had asked my accountant, (who has been reliable for the last 10 years), in December to apply for a Withholding Certificate. He became almost impossible to contact and it recently emerged he has done nothing. My realtor is trying to get the US buyers to sign an affadavit, (saying they plan to use the condo for more than 50% of the time), avoiding FIRPTA retention, but they may refuse. Why their residence intentions are relevant to possible avoidance of tax, is unclear. I have tried to get advice from the IRS but that seems to be impossible. I have lodged a complaint on maladministration by the IRS with TIGTA who, after some prodding, agreed to process it.

As you are further down the line than I am, (my sale is supposed to close on April 30), I would welcome any advice you can give on the process to recover the 10% withheld, as I suspect I will end up in that situation. As I understand things, the buyer's title attorney sends the 10% to the IRS. Is a Form 8288B sent at the same time? There must be some paperwork documenting the retention. What is sent to the seller?

What is most surprising is that US realtors are not complaining about the FIRPTA rules and process, which is ridiculously complex and opaque, as it must ultimately damage their business.
Flag Sat Mar 30, 2013
Neil,
You have my full agreement and my sympathy. I posted the original post last April and have still not had the witholding returned!! It is a disgrace and deterrent to non-US buyers..... except it is not widely known to non-US buyers. In fact I have had even more problems with 'professionals' in relation to the withholding since the original mess.
I agree it is a disgrace. I made a loss on the sale, have never worked in the US, have never had any form of income in the US and could have no tax liability for any form of tax. Yet I have spent much time and money dealing with this ridiculous withholding. I have been told it will take another 5 months before the withholding is released. A simple return detailing the losss to the IRS at the time of sale would suffice.
Flag Fri Mar 29, 2013
I respectfully disagree with Mike who doesn't know his BPR from his DBPR.

The issue is not going to be resolvable via the broker, this is an IRS matter.

Although a good agent with international clientele might have offered the advice you sought, I doubt they can be held accountable for not doing so. I understand your frustration but Realtors are not CPAs and cannot offer tax advice. Your CPA is the one who should have advised you on tax matters relating to your overseas investment and nobody else. And all buyers who are investing overseas should be hiring a local tax advisor as there are obvious issues that will come into play in any international transaction.

In short the agent could have done a better job, but not hiring an international CPA was the big mistake here... and unfortunately that mistake was yours. And it would seem you're going the cheap route again by trying to fix the problem on Trulia for free. If you want to get out of this fix - get the advice of a CPA!
3 votes Thank Flag Link Thu Apr 19, 2012
Marcus, I have read your comments with interest and some surprise.Firstly, If I did take up the kind offer made by Alan I would give him disclosure of whatever he wanted to see. Alternatively, the assistance may be the offer of giving advice who I should complain to, when I need to do it as opposed to, basically, preparing the complaint for me, which I would not expect or ask him to do. I am capable of making a complaint but do lack knowledge of who to complain to etc due to no fault of my own. Your loyalty to the 'fellow realtor' is blind - you appear to defend them simply because they are a realtor and not for any other reason. You should remember that the failings of an individual realtor reflects on the name of all realtors. Further, if, as you say they are not at fault, then they will not 'be thrown under a bus'
Flag Sat Apr 21, 2012
The realtors comments here seem to be split between I should sue the realtor for not making me aware of the Firpta and the realtor is not really at fault. Can I respectfully ask a question. I am being charged 6% by the realtor. The property in question is a little under $300,000 - charge of about $15,000 one third of the average wage og $45,000.00. Mark Le Manager states 'The state certifies us as experts in the value of propety'. My realtor took around 20 seconds to value the property by saying there is another house on the block for sale at $x, yours should go in at the same price. I am not trying to detract from realtors work but I think you let yourselves down by lazily saying we value property and nothing more - especially when you are dealing with houses which almost identical on the same block. You should be aware of tax implications on various criteria of sellers. I would not ask a realtor to complete a tax return but be aware of tax implications following the sale
Flag Fri Apr 20, 2012
Marcus, just to let you know one week after the contract was signed the realtor came back to me and informed me that due to the FIRPTA regulations there was no witholding - they were, of course, wrong - but they did actually inform me about the regulations - in other words they were well aware of FIRPTA. If they had n o idea about it why advise me on it (albeit incorrectly). Further, why did they not advise me to get tax advise prior to signing the contract, In the country I am from there is no tax due or withholding at the time of sale - only when the tax returns are completed.
Flag Fri Apr 20, 2012
John, there's no reason why you would have heard of FIRPTA. Most Realtors haven't heard it either, unless they do a lot of international work. Also, CPAs are not required in this country either but the point is wouldn't you want to get one anyway if you're buying real estate abroad? I don't own any real estate in China but if I ever purchase there I'm going to find the folk that understand the things I don't because although I don't know the laws in China, I'm pretty sure there must be tax consequences involved, either in their country or in mine. I mean what if you'd never heard of capital gains tax either? Who's responsibility is it to tell you about that? These are all tax matters that require specialist advice not the opinions of Realtors. Still I understand your frustration and I hope Harding & Assoc. can help you work it out.
Flag Fri Apr 20, 2012
Marcus, I had never heard of FIRPTA until 2 weeks after the contract was signed. The realtor did not advise me to get a CPA and in my country we do not require a CPA to sell a house.
Flag Thu Apr 19, 2012
The contract you signed probably had a disclosure about FIRPTA. I would read your contract before paying an attorney any money. You may have another escape in your contract to allow you to sell it to an owner-occupant buyer so you can avoid the withholding to the IRS. You might hire an attorney for advice in that area. Also you may need to decide if you would be able to get an offer from an owner-occupant buyer at the price of your current contract.
1 vote Thank Flag Link Thu Apr 19, 2012
My foreign sellers always sign a FIRPTA addendum with the contract. However, I do not know your specific situation and can not say if anything was done wrong or right. I am sorry about your situation. If you do not meet any of the following criteria.

This information may help you, it is directly from the IRS website-

Generally you do not have to withhold in the following situations; however, notification requirements must be met:
You (the transferee) acquire the property for use as a home and the amount realized (generally sales price) is not more than $300,000. You or a member of your family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant.
The property disposed of (other than certain dispositions of nonpublicly traded interests) is an interest in a domestic corporation if any class of stock of the corporation is regularly traded on an established securities market. However, if the class of stock had been held by a foreign person who beneficially owned more than 5% of the fair market value of that class at any time during the previous 5-year period, then that interest is a U.S. real property interest if the corporation qualifies as a United States Real Property Holding Corporation (USRPHC), and you must withhold on any disposition.
The disposition is of an interest in a domestic corporation and that corporation furnishes you a certification stating, under penalties of perjury, that the interest is not a U.S. real property interest. Generally, the corporation can make this certification only if the corporation was not a USRPHC during the previous 5 years (or, if shorter, the period the interest was held by its present owner), or as of the date of disposition, the interest in the corporation is not a U.S. real property interest by reason of section 897(c)(1)(B) of the Internal Revenue Code. The certification must be dated not more than 30 days before the date of transfer.
The transferor gives you a certification stating, under penalties of perjury, that the transferor is not a foreign person and containing the transferor's name, U.S. taxpayer identification number, and home address (or office address, in the case of an entity).
You receive a withholding certificate from the Internal Revenue Service that excuses withholding. Refer to Withholding Certificates.
The transferor gives you written notice that no recognition of any gain or loss on the transfer is required because of a nonrecognition provision in the Internal Revenue Code or a provision in a U.S. tax treaty. You must file a copy of the notice by the 20th day after the date of transfer with the:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409.
The amount the transferor realizes on the transfer of a U.S. real property interest is zero.
The property is acquired by the United States, a U.S. state or possession, a political subdivision thereof, or the District of Columbia.
The grantor realizes an amount on the grant or lapse of an option to acquire a U.S. real property interest. However, you must withhold on the sale, exchange, or exercise of that option.
The disposition (other than certain dispositions of nonpublicly traded interests) is of publicly traded partnerships or trusts. However, if an interest in a publicly traded partnership or trust was owned by a foreign person with a greater than 5% interest at any time during the previous 5-year period, then that interest is a U.S. real property interest if the partnership or trust would otherwise qualify as a USRPHC if it were a corporation, and you must withhold on it.

Certifications
The certifications in items (3) and (4) are not effective if you have actual knowledge, or receive a notice from an agent, that they are false. If you are required by regulations to furnish a copy of the certification to the IRS and you fail to do so in the time and manner prescribed, the certifications are not effective.
1 vote Thank Flag Link Thu Apr 19, 2012
as an oversees seller there should have been A FIRPTA addendum to the contract. Unfortunately, it appears that you chose a realtor that is not familiar with dealing with foreign sellers. Having said that it is not too late. You can get with a CPA ( accountant ) to do the 882b before closing and all will be well. As far as some recourse you may want to suggest that the extra cost to you for the CPA services are paid from your realtors commission. Realtors are not supposed to take on work that they have no expertise in. That is enshrined in the realtor code of ethics. If you need more help with a complaint then please call , e mail, or text. It is not right that you have been disadvantaged because your agent took on a listing that he/she could not adequately service because they lacked the knowledge required. alan@frontlinefloridarealty.com
http://www.frontlinefloridarealty.com
407 832 4888
0 votes Thank Flag Link Fri Apr 20, 2012
Marcus,
I have read your comments with interest and some surprise.Firstly, If I did take up the kind offer made by Alan I would give him disclosure of whatever he wanted to see. Alternatively, the assistance may be the offer of giving advice who I should complain to, when I need to do it as opposed to, basically, preparing the complaint for me, which I would not expect or ask him to do. I am capable of making a complaint but do lack knowledge of who to complain to etc due to no fault of my own. Your loyalty to the 'fellow realtor' is blind - you appear to defend them simply because they are a realtor and not for any other reason. You should remember that the failings of an individual realtor reflects on the name of all realtors.
Flag Sat Apr 21, 2012
You really want to put yourself out there to personally assist in throwing this agent under the bus because they may not have given good tax advice? The first half of your advice is great, right up until the point where you start giving out your personal phone number to assist an unknown buyer complain about a fellow Realtor on a matter that you have no personal knowledge of.
Flag Sat Apr 21, 2012
Thanks for all the advice given. I am sorry to see that it has split you so much between the realtor is at fault/sue and the realtor has done nothing wrong.

From my perspectie I put myself in the hands of what I believed was a professional realtor not 'a house valuer' and I feel that the issue should have been raised prior to the contract being sent to my and being advised to sign it.
0 votes Thank Flag Link Fri Apr 20, 2012
Great answer, Marcus

I am an overseas seller. I instructed an agent and found a buyer. I signed the (standard)contract sent to me. The realtor never mentioned anything about FIRPTA,
0 votes Thank Flag Link Fri Apr 20, 2012
The realtors comments here seem to be split between I should sue the realtor for not making me aware of the Firpta and the realtor is not really at fault. Can I respectfully ask a question. I am being charged 6% by the realtor. The property in question is a little under $300,000 - charge of about $15,000 one third of the average wage og $45,000.00. Mark Le Manager states 'The state certifies us as experts in the value of propety'. My realtor took around 20 seconds to value the property by saying there is another house on the block for sale at $x, yours should go in at the same price. I am not trying to detract from realtors work but I think you let yourselves down by lazily saying we value property and nothing more - especially when you are dealing with houses which almost identical on the same block. You should be aware of tax implications on various criteria of sellers. I would not ask a realtor to complete a tax return but be aware of tax implications following the sale
Flag Fri Apr 20, 2012
If we're only talking about a few thousands of dollars it may not be worth the risk.

Also you can file a tax return and possibly get that money back from the IRS... by the way.

Go to http://www.IRS.gov if you want to try to figure it out for yourself or hire a Certified Public Accountant.

To cancel your contract you need an attorney's advice. Be very careful where you get your advice--Realtors are not qualified; in Florida we're required to only have a High School Education and be 18 years old to "practice" as a Realtor! Many have education beyond that but it's funny because statistics have shown that the higher level of education of a Realtor, the lower their income!

Good luck!
Alma
0 votes Thank Flag Link Fri Apr 20, 2012
I doubt there are many accountants who follow this Q&A blog. That is who you need to talk to, not realtors. The state certifies us as experts in the value of propety, not in tax matters. Marcus is on the money here. You need an accountant. Try these guys:
http://www.hardingtax.com/

Good luck.
0 votes Thank Flag Link Fri Apr 20, 2012
The realtors comments here seem to be split between I should sue the realtor for not making me aware of the Firpta and the realtor is not really at fault. Can I respectfully ask a question. I am being charged 6% by the realtor. The property in question is a little under $300,000 - charge of about $15,000 one third of the average wage og $45,000.00. Mark Le Manager states 'The state certifies us as experts in the value of propety'. My realtor took around 20 seconds to value the property by saying there is another house on the block for sale at $x, yours should go in at the same price. I am not trying to detract from realtors work but I think you let yourselves down by lazily saying we value property and nothing more - especially when you are dealing with houses which almost identical on the same block. You should be aware of tax implications on various criteria of sellers. I would not ask a realtor to complete a tax return but be aware of tax implications following the sale
Flag Fri Apr 20, 2012
Those are the guys we also use Mark. They really get this stuff... Nice referral.
Flag Fri Apr 20, 2012
John,

I feel horrible for the situation that you are finding yourself in and I second Marcus' advice to consult with a CPA and add my recommendation to speak with a Real Estate Lawyer as soon as possible.

There are steps that can be taken prior to closing to reduce the amount of withholding, but they do take a bit of time.

Iif you do not have enough time left in the contract to work this out... have your agent communicate with your buyers to see if they will allow an extension to do so. It is inescapable that many deals fall-through due to issues discovered after the contract is signed, I'm sure they'd prefer to wait a bit for you to get your end sorted than to have you cancel the deal and them having to begin the shopping process all over again. If you are not feeling confident in your agent's ability, please speak with their Broker.

Alys Esmond
Century 21 Professional Group, Inc.
(321)695-5593
0 votes Thank Flag Link Thu Apr 19, 2012
Hi Alys,
Thanks for the advice. Can you tell me (I know you don't have a copy of the contract) - what would happen it we cancel the contract - our realtor said we could not as we had signed.
Flag Fri Apr 20, 2012
Here is a follow up to my previous answer regarding liability-
This is direct from the IRS website.
Liability of Agents

If you receive either of the certifications discussed in item (3) or (4) and the transferor's agent or your agent (the transferee's agent) has actual knowledge that the certification is false, or in the case of (3), that the corporation is a foreign corporation, the agent must notify you, or the agent will be held liable for the tax. The agent's liability is limited to the amount of pay the agent gets from the transaction.

An agent is any person who represents the transferor or transferee in any negotiation with another person (or another person's agent) relating to the transaction, or in settling the transaction. A person is not treated as an agent if the person only performs one or more of the following acts related to the transaction:

Receipt and disbursement of any part of the consideration,
Recording of any document,
Typing, copying, and other clerical tasks,
Obtaining title Insurance reports and reports concerning the condition of the property, or
Transmitting documents between the parties.

A Withholding Agent is personally liable for the full amount of FIRPTA withholding tax required to be withheld, plus penalties and interest. A Withholding Agent is any person having the control, receipt, custody, disposal or payment of income that is subject to withholding. Generally, the person who pays an amount to the foreign person subject to withholding must do FIRPTA withholding.

I wish you the best of luck with this and if I can be of any assistance, send me an email. Regards, Danny
0 votes Thank Flag Link Thu Apr 19, 2012
First of all I would call his Broker and let him know all this problem and ask him to resolve this problem, if this does not work, file a formal complain againt the Realtor, Broker and the Real Estate company. The formal complain must be filed in the BPR: http://www.myfloridalicense.com/dbpr/re/documents/re-2200-1.pdf

Secong hire an attorney regarding this issue.

Good luck
0 votes Thank Flag Link Thu Apr 19, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer