Canadians thinking about selling our financed contract

[joerohdesearring]

Note: this is something I'm just thinking about but had some questions. If we sold our resale contract that we've financed, does the financing company just get paid off the amount we still owe and the rest goes in our pocket? I understand there are some other considerations like commission and 15% being held back if we don't get a US tax ID. Does anyone have experience with this? Only thinking about this to see if we could use the money towards buying direct later this year.

 

[RoseGold]

The financing company gets paid at close, like any other real estate transaction.

You are responsible for paying the taxes to the IRS on the gain. This could be substantial. Between the 15% holdback, commission, and the finance company, it's possible you have to bring money to the table, even if you made money on the overall transaction.

https://www.disboards.com/threads/tax-implications-for-canadians.3748873/

 

[Sandisw]

As mentioned, the proceeds from the sale cover it all, and if something is left, you get that.

If the proceeds from the Sale don’t cover all the expenses to sell, then you will have to make up the shortfall.

Brokers can help you figure it all out so you know what you can sell for without having to owe anything.

 

[RoseGold]

Brokers can help you figure it all out so you know what you can sell for without having to owe anything.

Assuming you made money on the sale, which is probable in current resale pricing, you will still owe tax on the gain to the IRS. It may or may not match the 15% withholding. That withholding number is irrelevant to the actual amount you owe. If you bought this contract many years ago, that tax amount could be more than 15%. If you about broke even, obviously much less.

 

[Sandisw]

Assuming you made money on the sale, which is probable in current resale pricing, you will still owe tax on the gain to the IRS. It may or may not match the 15% withholding. That withholding number is irrelevant to the actual amount you owe. If you bought this contract many years ago, that tax amount could be more than 15%.

True but brokers can still give you a general idea. I am thinking if financing is still involved, it wasn’t bought that long ago.

 

[lovethesun12]

The financing company gets paid at close, along with commission for the sale and FIRPTA agent if you opt to have one (I know people have reservations about going this route but I don't understand that logic since the IRS has all a person's information from the purchase/sale anyway, but I digress).

I highly doubt you would lose on the sale or have to bring money to the table if you bought resale and have up to date payments, unless the purchase closed within the last few months.

I would contact a broker.

 

[joerohdesearring]

True but brokers can still give you a general idea. I am thinking if financing is still involved, it wasn’t bought that long ago.

Yes we bought early 2020.

 

[DVCanadian]

Some things to consider. Helpful guide from RBC.
https://discover.rbcroyalbank.com/selling-your-u-s-property-5-things-canadians-need-to-know/

 

[bigorsmall]

Very helpful! Thank you for sharing.

 

[joerohdesearring]

Some things to consider. Helpful guide from RBC.
https://discover.rbcroyalbank.com/selling-your-u-s-property-5-things-canadians-need-to-know/

That's very helpful information. Thank you! For now, we're holding onto our current contract.

 

[lovethesun12]

Some things to consider. Helpful guide from RBC.
https://discover.rbcroyalbank.com/selling-your-u-s-property-5-things-canadians-need-to-know/

Thanks so much for posting this. Very useful information.