TSS now listing international sellers on contracts

[CMNJ]

Just glanced at the latest email from the TSS while drinking my morning coffee and what caught my eye was the bolded parts of some listings showing certain contracts were from international sellers. Just thought it was interesting since that had not seemed to be done in the past. Noticed a few listings said Canadian Seller and one that said United Kingdom Seller.

 

[linzjane88]

I noticed that too. What's the reasoning? I'm assuming maybe because it would take longer with a seller from another country?

 

[McCrae]

You need to be aware of potential tax liability if the seller does not pay withholding tax.

A good broker should structure a deal to make sure you are protected against this potential charge.

 

[satman1962]

As a Canadian seller who just sold a BCV contract with TSS, I can report that the title company TSS dealt with automatically withholds the tax due. I can't imagine a buyer being impacted in any way when dealing with TSS who were excellent by the way. So I can only imagine this may put foreign sellers at a disadvantage. I'd be very interested to know the reasons for posting this info all of a sudden.

 

[hayesdvc]

Just glanced at the latest email from the TSS while drinking my morning coffee and what caught my eye was the bolded parts of some listings showing certain contracts were from international sellers. Just thought it was interesting since that had not seemed to be done in the past. Noticed a few listings said Canadian Seller and one that said United Kingdom Seller.

I noticed the same thing. I purchased a contract from TSS in December and when I went to sign it, I found out the seller was in Canada. At that time, the listing did not mention the foreign seller.

 

[CMNJ]

You need to be aware of potential tax liability if the seller does not pay withholding tax.

A good broker should structure a deal to make sure you are protected against this potential charge.

I could be mistaken but I don't believe the seller pays the tax-the closing company who handles the sale actually is the one who should (automatically) withhold the tax from the final settlement and sends it to the IRS. The international seller can claim it back from the IRS by registering for a tax ID # and filing specific forms. Technically speaking I believe the buyer is responsible for withholding the tax so if for some reason a closing company goofed and didn't withhold it correctly the buyer could be responsible for paying the IRS the correct amount. In order to submit the necessary paperwork for the seller to claim the withheld tax back the buyer's social security # must be given. We were not comfortable sharing our social security # simply to buy a contract from a foreign seller (we did not finance so there was no reason to have to give it otherwise).
........I decided to actually google it and here is the info direct from the IRS website

FIRPTA Withholding
Withholding of Tax on Dispositions of United States Real Property Interests
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 10 percent of the amount realized on the disposition (special rules for foreign corporations). In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent.

I noticed that too. What's the reasoning? I'm assuming maybe because it would take longer with a seller from another country?

That could be another reason too. It seems that it is much easier for Canadian sellers to get their documents notarized (more US notaries in Canada or they could be close to the US border) but in many countries US notaries are typically only found at US consulates. This can obviously slow the process as they have to obtain an appt to see the notary and possibly travel far to get to the consulate. Perhaps they have had enough complaints from buyers who weren't aware of the possible delay to decide to disclose upfront so people can't say they didn't realize?

 

[McCrae]

I could be mistaken but I don't believe the seller pays the tax-the closing company who handles the sale actually is the one who should (automatically) withhold the tax from the final settlement and sends it to the IRS. The international seller can claim it back from the IRS by registering for a tax ID # and filing specific forms. Technically speaking I believe the buyer is responsible for withholding the tax so if for some reason a closing company goofed and didn't withhold it correctly the buyer could be responsible for paying the IRS the correct amount. In order to submit the necessary paperwork for the seller to claim the withheld tax back the buyer's social security # must be given. We were not comfortable sharing our social security # simply to buy a contract from a foreign seller (we did not finance so there was no reason to have to give it otherwise).
........I decided to actually google it and here is the info direct from the IRS website

FIRPTA Withholding
Withholding of Tax on Dispositions of United States Real Property Interests
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 10 percent of the amount realized on the disposition (special rules for foreign corporations). In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent.




That could be another reason too. It seems that it is much easier for Canadian sellers to get their documents notarized (more US notaries in Canada or they could be close to the US border) but in many countries US notaries are typically only found at US consulates. This can obviously slow the process as they have to obtain an appt to see the notary and possibly travel far to get to the consulate. Perhaps they have had enough complaints from buyers who weren't aware of the possible delay to decide to disclose upfront so people can't say they didn't realize?

You are right the seller is label to pay the tax.... But if they don't the IRS claims it against the buyer. This forum had a thread on this a few months ago.

 

[girli565]

I have a friend who was buying resale from TSS while I was purchasing mine, and the sellers were international, Egypt I believe. After the initial offer was accepted and the paperwork drawn up the sale stalled on the sellers end because they could not get documents notarized without having to go to the embassy. They needed an appointment and they couldn't get one for a few months. My friend did not want to continue waiting, they were already well past the closing date in their contract, so they withdrew their offer and made a new one on another contract but were clear they did not want to purchase from another international seller. Maybe experiences like this are why.

 

[satman1962]

Well I can't speak for the Egyptians, but here in Canada, ANY licensed notary can notarize the documents required. They don't have to be US Notaries. I recently paid 30$ per document (there were 3) to close my sale. it took 15 minutes. The FIRPTA was automatically withheld by the title company and we closed 3 months after the initial offer. I still think it's a bit unfair to label the resales this way as it could keep some from making offers due to the misinformation. Does it have to be in BOLD as if to say beware??

 

[linzjane88]

I do agree that doing that makes it appear that the sale is risky. I think because of the bold, too.
That is crazy that a notary is so hard to come by in other countries. The hospital I work for made all the secretaries on our floor become notaries so we could notarize paternity forms for new parents. I never took a test or anything, IIRC.

 

[Firepath]

My first thought when I saw it was that perhaps it would be easier for an international buyer to purchase from an international seller; for instance a UK resident to buy from another UK resident. I don't know if that's the case, but that was the only positive reason I could think of.