This post is not legal advice. For legal advice, consult an attorney, not a blog.
A few months ago I posted about the Foreign Investment in Real Property Tax Act (or FIRPTA, pronounced just like its spelled). I didn’t get nearly the response I imagined, only an exchange with Tim Kane, our own escrow contributor. The absence of responses, and the initial nature of Tim’s response, got me to wondering: Am I missing something? Surely other people must appreciate this issue if its as significant as I believe…
Well, I am here to report that IMHO I’m not missing anything. I ran the “Is FIRPTA compliance a big deal?” question by some other attorneys who routinely act as escrow agents. The universal response? “Yes! FIRPTA is a big deal.” Buyers must be aware of and insure compliance with FIRPTA, particularly because the other professionals who typically assist a buyer (the escrow company, the buyer’s real estate agent) either don’t know or apparently don’t care too much about the buyer and the exposure that results from ignoring this federal law.
Oh, and FIRPTA is getting to be bigger deal all the time. With the burst of the “housing bubble” U.S. real property has become an attractive investment to foreigners. “Investment” means that, at some point those houses will be sold; “foreigners” means that, when sold, the buyer had better withhold 10% of the sale price or the buyer may have to pay that tax bill himself. In other words, buyers, ignore — or even be ignorant of — FIRPTA at your peril.