A friendly warning to resale buyers

[MouseOfCards]

Based on our recent experience, wanted to give a friendly warning to resale buyers: Make sure to ask the timeshare broker if the seller is a foreigner. If the transaction involves an international seller, you should consider the following:

1. The title company may charge you extra fees for processing FIRPTA (and HARPTA, for Hawaii) forms for withholding taxes for foreign sellers - we were charged over $200 and it raised our closing costs well above the given estimate. Those services/fees were never mentioned in our contract, but the title company said we were responsible because the contract stated "Buyer shall pay all closing costs." (FYI - We found that exact same wording on our contracts from Fidelity, DVC Resale Market, and The Timeshare Store)

2. The title company will require your social security number (SSN), which is not typically needed on non-foreign transactions.

3. There may be additional time or delays involved as some title companies will require sellers to notarize their documents at a U.S. embassy or consulate. Our seller also needed to arrange for translation services.

4. You (the buyer) may also be required to get the closing documents notarized - we were required to do this for an Aulani purchase. Don't know if this was due to Hawaii or the international seller.

We did not know about these additional fees/requirements/delays and they were never mentioned to us by the broker rep nor in the contract that we signed. Just a heads up.

 

[disneynutz]

Good to know, thank you!

Bill

 

[CMNJ]

Based on our recent experience, wanted to give a friendly warning to resale buyers: Make sure to ask the timeshare broker if the seller is a foreigner. If the transaction involves an international seller, you should consider the following:

1. The title company may charge you extra fees for processing FIRPTA (and HARPTA, for Hawaii) forms for withholding taxes for foreign sellers - we were charged over $200 and it raised our closing costs well above the given estimate. Those services/fees were never mentioned in our contract, but the title company said we were responsible because the contract stated "Buyer shall pay all closing costs." (FYI - We found that exact same wording on our contracts from Fidelity, DVC Resale Market, and The Timeshare Store)

2. The title company will require your social security number (SSN), which is not typically needed on non-foreign transactions.

3. There may be additional time or delays involved as some title companies will require sellers to notarize their documents at a U.S. embassy or consulate. Our seller also needed to arrange for translation services.

4. You (the buyer) may also be required to get the closing documents notarized - we were required to do this for an Aulani purchase. Don't know if this was due to Hawaii or the international seller.

We did not know about these additional fees/requirements/delays and they were never mentioned to us by the broker rep nor in the contract that we signed. Just a heads up.

That's really interesting about the higher closing costs that were not disclosed by the broker when the estimate was given. We were made aware of the need to disclose SS# to complete the FIRPTA forms and the possible delays when we were looking into buying from an international seller in 2014. There was never any mention of higher closing costs. We didn't proceed with that sale but this is the first I've seen someone mention this problem. I wonder if that is something new closing companies are charging for now or if previously international sellers had to pay for the cost of the FIRPTA paperwork? My understanding was that usually the title company not only withheld the FIRPTA tax but also worked with the seller to complete the necessary paperwork for them to claim a refund from the IRS. As a buyer I would be unhappy having additional fees added on later that were really to assist the seller. What title company are you using?

 

[Cyberc1978]

The few times i had put in an offer on an international contract the brokers always mentioned that FIRPTA and that addition costs was to be expected.

My offer on the international contracts was therefore lower compared to what else I might have offered.

Regading delays non international sellers might also delay the process so it's not only the international sellers who might do that.

Regards

 

[MouseOfCards]

That's really interesting about the higher closing costs that were not disclosed by the broker when the estimate was given. We were made aware of the need to disclose SS# to complete the FIRPTA forms and the possible delays when we were looking into buying from an international seller in 2014. There was never any mention of higher closing costs. We didn't proceed with that sale but this is the first I've seen someone mention this problem. I wonder if that is something new closing companies are charging for now or if previously international sellers had to pay for the cost of the FIRPTA paperwork? My understanding was that usually the title company not only withheld the FIRPTA tax but also worked with the seller to complete the necessary paperwork for them to claim a refund from the IRS. As a buyer I would be unhappy having additional fees added on later that were really to assist the seller. What title company are you using?

Yes, we were not happy about having additional fees added on that were really to assist the seller. We were using Old Republic Title of Hawaii.

 

[KAT4DISNEY]

I thought that the FIRPTA was the responsibility of the seller and only comes back on the buyer if the seller does not pay it? It should not be on the buyer up front. I guess the thing to do would be to have it added as part of the contract that the seller is responsible for those fees (although IRS would still come at the buyer if necessary).

 

[mustinjourney]

The delays can be a real thing. When dealing with international sellers, they'll likely have to go to the US embassy to get the document notarized. In some cases, this can be quite an ordeal for the seller, and if they haven't planned ahead, in can take several weeks for them to get an appointment with a notary at the US embassy. I can attest to this first hand.

Another bit of advice -- the second you pass ROFR -- the sellers should immediately get in touch with the US embassy and schedule an appointment for about 10-14 days later. This way, the wait for the appointment overlaps with estoppel and preparation of the closing documents. Otherwise, you could end up like me, and have 4 weeks of dead time waiting for the sellers to get the paperwork in.

Another piece of advice -- not sure if this is true for all countries, but in Argentina, the US embassy will not provide you with witnesses. You have to bring your own -- so make sure the seller is also aware they need to bring someone or find strangers on the street before they go in.

 

[Meandnevaeh]

My closing costs were not higher due to an international seller, I was aware of Firpta however the seller was required to those fees at closing, it was in our contract and they had to pay it at closing. Granted it was delayed a little longer because it took them some time to get notarized, however the timeliness in doing these types of things could happen for any seller or buyer.

 

[CMNJ]

I thought that the FIRPTA was the responsibility of the seller and only comes back on the buyer if the seller does not pay it? It should not be on the buyer up front. I guess the thing to do would be to have it added as part of the contract that the seller is responsible for those fees (although IRS would still come at the buyer if necessary).

I think the OP was saying that the closing company charged the buyer fees for filing the paperwork associated with FIRPTA (and HARPTA) because it was part of the closing services. Since the buyer agreed to "pay all closing fees" in their contract the closing company said they had to cover these costs. My understanding of FIRPTA is that it is the buyer's responsibility to withhold the tax and pay the IRS. The foreign seller can then file for a refund from the IRS. Usually this is all handled by the closing company but I find it very dishonest that these additional fees were not disclosed to the buyer at the time the offer was made and contracts were signed. These are not unforeseen circumstances. Clearly the broker knew the seller was not from the US and the property was in Hawaii. I can understand charging higher fees for more work but the estimate from the broker should have indicated those from the beginning.

 

[MouseOfCards]

I think the OP was saying that the closing company charged the buyer fees for filing the paperwork associated with FIRPTA (and HARPTA) because it was part of the closing services. Since the buyer agreed to "pay all closing fees" in their contract the closing company said they had to cover these costs. My understanding of FIRPTA is that it is the buyer's responsibility to withhold the tax and pay the IRS. The foreign seller can then file for a refund from the IRS. Usually this is all handled by the closing company but I find it very dishonest that these additional fees were not disclosed to the buyer at the time the offer was made and contracts were signed. These are not unforeseen circumstances. Clearly the broker knew the seller was not from the US and the property was in Hawaii. I can understand charging higher fees for more work but the estimate from the broker should have indicated those from the beginning.

Your understanding is correct. When we first agreed on the contract, we asked why the closing costs were a few hundred dollars higher than our other contracts, and were told by the broker that this was typical for Aulani. However, when we received the closing docs, these FIRPTA/HARPTA fees (which were never brought up by the broker nor mentioned in the contract) pushed the closing costs significantly higher.

 

[MouseOfCards]

My closing costs were not higher due to an international seller, I was aware of Firpta however the seller was required to those fees at closing, it was in our contract and they had to pay it at closing. Granted it was delayed a little longer because it took them some time to get notarized, however the timeliness in doing these types of things could happen for any seller or buyer.

Very interesting. A few questions for you:
1. Was yours a recent transaction?
2. Did you have to negotiate the seller paying those fees, or was it already in your contract?
3. Did your contract have the wording, "Buyer shall pay all closing costs"?
4. Which timeshare broker and title company did you use?

 

[Meandnevaeh]

Closed in April of this year, I did not have to negotiate the seller paying the fees, it did say in the contract that buyer pays closing costs, however there were not any extra closing costs thrown at me last minute, actually I paid lower closing costs in actual than I had been quoted initially. I used The timeshare Store and they were very up front about the seller being foreign, and let me know ahead of time about possible delays and extra step of motorizations and firpta. Title and closing was Magic Vacation Title. I was informed in the beginning and it was in the contract that the seller would be pay the firpta fees

 

[LAX]

If it were me, I would have balked at paying those "unexpected" fees that have been omitted from the estimates. I can understand if the original estimate of a particular fee is $80 in stead of $50, but to charge an additional fee not listed on the estimate?! What would prevent them from adding a "title company surcharge or any other scam fee" for say $500 that has been convenient left off of the estimate??

LAX

 

[aoconnor]

I recently closed on a contract from an international seller (UK) and it was painless. I used The Timeshare Store/ *** and did NOT incur any additional closing costs related to FIRPTA; they were $425 total. They handled all the FIRPTA stuff on their end.

I'm sure the country that the seller is from makes a difference. In the UK it is relatively easy to get something notarized, did not cause any delays for me.