Frequently Asked Questions

FAQ

Can a non US citizen sell real estate?

In addition, non-U.S. citizens are liable for paying local property taxes. And when selling a property in the United States as a non-U.S. citizen, capital gains tax will typically apply as well. “When selling a property in the U.S. there are special withholding provisions that must be complied with,” says Ailion.

What is the withholding on the sale of real estate by foreign person?

The IRS requires 15% of the sales price be withheld on the sale of United States real property interests by foreign persons (on sales above $1,000,000), and either 15% or 10% on sales between $300,001 and $1,000,0000, and either 15% or $0 for sales of $300,000 and under.

Who is considered a foreign person?

A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch of a U.S. financial institution if the foreign branch is a qualified intermediary.

Which mortgage is in first lien position taking priority over all other liens?

Once the existence of a purchase-money mortgage is established, the purchase-money lien has priority over all other liens on real property.

What are the risks of a second lien?

Second-lien debt also comes with more risk, and it ranks lower than other high-risk loans should a business file for bankruptcy or go through liquidation. These subordinated loans might yield insufficient collateral in the event of a bankruptcy.

What does 2nd lien position mean?

A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house.

Are second lien loans secured against the property?

The lender of a second mortgage becomes the second lienholder against the mortgaged property. If the borrower fails to pay their mortgage and foreclosure takes place, the second lender gets paid only after the first lender receives the balance of the outstanding debt.

Is first lien more senior than second lien?

The difference between the first and second lien debt is the seniority of their claims against the pledged collateral per the intercreditor agreement. First lien debt has the higher priority claim on the company's pledged collateral, whereas the second lien is of lower standing.

What if the seller is a foreign person?

FIRPTA, the Foreign Investment in Real Property Transfer Act, is part of the U.S. tax code. It requires buyers of real estate to withhold up to 15% of the sale price when the seller is a foreign person.

What is a junior loan in a real estate transaction

What will the IRS withhold when a foreign person sells a US property?	FIRPTA: What It Is and How It Works FIRPTA requires that any individual who is selling a property in the U.S. that is not a U.S. citizen will have 15% of the gross sales price withheld at closing.
What is the meaning of sold As is?	"As is" denotes that the seller is selling, and the buyer is buying an item in whatever condition it presently exists, and that the buyer is accepting the item "with all faults", whether or not immediately apparent.
What federal act requires that if the seller of real property is a foreign person the buyer is required to withhold 15% of the sales price?	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.
What is considered a foreign person?	The term “foreign person” means any individual or entity that is not a United States citizen, a permanent resident alien, or an entity organized under the laws of the United States or any jurisdiction within the United States.
What are the two frequently encountered types of subordination?	Broadly, there are two types of subordination: structural (common in the UK and mainland Europe) and contractual (common in the US). On a contractual subordination, loans are made to the same company but the senior creditor and junior creditor agree priority of payment by contract.
What are the types of subordination agreements?	Two types of subordination agreements are: Executory Subordination and Automatic Subordination. These differ in the timing of when priority rights are given and the contractual performance required by the subordinated party.
What are the requirements for a subordination agreement?	A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.
What is an example of a subordination clause in real estate?	Lender and Tenant do hereby covenant and agree that the Lease with all rights, options, liens and charges created thereby, is and shall continue to be subject and subordinate in all respects to the lien created by the First Lien Mortgage, including any renewals, modifications, consolidations, replacements and
What are problems with subordination?	Problems with subordination include placing main ideas in subordinated clauses and phrases and including too many subordinate ideas in one sentence.

• How do I report foreign property sale to the IRS?

  • Reporting the sale of foreign property to the IRS and FinCEN

    If the income you made from the sale of your foreign property was deposited into a foreign bank, you may have to report it on a Foreign Bank Account Report (FBAR) by using FinCEN Form 114. You may also need to file FATCA Form 8938.

• Are foreigners taxed on real estate capital gains?

  • In general, US capital gains are not taxable to nonresident aliens. Rather, capital gains are considered sourced at the location of the Taxpayer. This general rule does not apply to individually owned US real estate by a foreigner, non-resident alien. Individually owned real estate is taxed on the sale as capital gain.

• How to sell foreign real estate?
  • Six steps to selling property abroad
    1. Choose the right time to sell. As with any investment, you'll want to sell at a time when you can maximize profits.
    2. Work with a real estate agent.
    3. Prepare your documents.
    4. Wait for someone to make an offer.
    5. Sign the sales contract and pay any fees.
    6. Report your sale to the IRS.
• What is the capital gains tax for foreigners?

  • A flat tax of 30 percent (or lower treaty) rate is imposed on U.S. source capital gains in the hands of nonresident alien individuals present in the United States for 183 days or more during the taxable year.

• What is the purpose of a non-foreign affidavit?

  • A FIRPTA affidavit, also known as Affidavit of Non-Foreign Status, is a form a seller purchasing a U.S. property uses to certify under oath that they aren't a foreign citizen. The form includes the seller's name, U.S. taxpayer identification number and home address.

• What is a seller's certification of non-foreign status?

  • Certification of nonforeign status.

    The transferor provides a certification of nonforeign status signed under penalties of perjury that states that the transferor is not a foreign person, and provides the transferor's name, TIN, and address.

• Why do you need a FIRPTA certificate?

  • FIRPTA Certificate: A FIRPTA certificate is used to to notify the IRS that the seller of real estate is not a foreign-person. When a foreign person sells real estate, the IRS wants to know about it. Even though some capital gains income tax is exempt to foreign persons, real estate is not exempt.

• What is the affidavit of foreign status?

  • General Instructions: Purpose: Use Form W-8 or a substitute form containing a substantially similar statement (affidavit) to tell the workplace, payer, mortgage interest recipient, middleman, broker, or barterer that you are an exempt foreign person not subject to backup withholding rules or certain U.S. information