As a foreign investor, you are often faced with confusing rules and regulations when investing in U.S. property. Real estate laws can differ significantly from your home country, making the process complicated and puzzling. The best course of action for a foreign seller or investor to avoid this confusion and ensure their closing process goes smoothly, is to work with a United States real estate professional or team of professionals when buying or selling property in the U.S.
Real Estate Professionals That Aid A Foreign Seller
A real estate closing in the United States can involve many players. Besides the buyer and seller, there may be realtors working with both sides. Each side might also have a lawyer representing their interests and reviewing contracts. In most cases there is a mortgage lender involved and a title insurance agency—like Ocean Title and Escrow—pulls it all together.
How FIRPTA Affects A Foreign Seller
One of the most important considerations real estate and title insurance professionals must be familiar with when a foreign seller is involved is the Foreign Investment in Real Property Tax Act of 1980, also known as FIRPTA. FIRPTA is an IRS regulation that requires a foreign seller of a property to remit 10% of the purchase price to the IRS.
If Ocean Title and Escrow is serving as your title insurance agency and escrow holder, we can withhold the required 10% of the purchase price and remit it to the IRS on your behalf.
The Title Agency And A Foreign Investor
By working with a reputable and experienced real estate title insurance agency like Ocean Title and Escrow, a foreign investor can be assured that the closing process will go smoothly and all legal obligations will be met. Ocean Title serves as an impartial player in the closing, collecting documents, researching the property title and oftentimes holding funds as an escrow agent. It is our job to make sure the closing happens, and not to favor the buyer or the seller.
Ocean Title often serves the role of communicator between all parties, which can be a very valuable service for a foreign investor. We are able to walk investors through U.S.-specific terminology, rules and regulations and answer any questions that come up. We are also up-to-date on IRS rules and regulations governing the FIRPTA. The law states that if the 10% withholding is not done at closing, the buyer can be held liable for it and potentially, the buyer’s realtor or the title agency. Therefore, it is in everyone’s best interest that we make sure the funds are withheld and deposited.
With the right guidance from the professionals at Ocean Title and Escrow, a foreign investor or seller can be assured of understanding U.S. real estate terminology and rules, and can experience a smooth closing.