FIRPTA, IRS      FIRPTA, IRS & Withholding Exceptions     WHAT IS FIRPTA:


FIRPTA:  Language for purchase contract when representing buyer:  “Seller agrees to pay any FIRPTA tax which may be due upon sale.”

FIRPTA:  Several areas in the listing and contract already address FIRPTA, for example:  

1) The ER Listing Agreement has language regarding FIRPTA: (sect 11g, line #181). 

2) The MLS Residential Input Form has a box to check if FIRPTA may apply (special listing conditions section).

3) There is also a question (#13) on the SPDS where the seller discloses FIRPTA

4) Finally, there is a section in the PC which addresses FIRPTA: (4c, line #162).  


“Seller will sell to owner occupants only due to FIRPTA tax requirements.”  “Buyer agrees to execute FIRPTA exemption document within __ days of contract acceptance.”

I've seen this a few times recently, and would say it's fine.  She just needs to be clear on MLSI would put this in private remarks: Buyer absolutely must be an owner/occupant, Seller will not consider offers from investors.  Buyer must agree to execute the FIRPTA Buyer Affidavit.  Call Listing Agent for details.”  I also think that she really needs to have something in the contract that protects her Seller from this issue as well.  Having the language in MLS is great, but it doesn't give the Seller a leg to stand on if the Buyer changes their mind during the escrow (which is one of the scenarios I've discussed with an agent recently).  I would counter any offer and say that the Buyer affirms that they are purchasing the property as an owner occupant, and that they agree to complete any necessary documentation for title stating that is the case.  At least something to that effect so that if the Buyer does have thoughts about not agreeing to be an owner occupant, the Seller has an angle for a cure notice.

As far as paying a commission to an agent that has a full price offer for an investor, that won't be a problem.  You're never obligated to pay a commission just because an agent brings a Buyer with a full price offer, so she doesn't need to worry about that.   (And I think the language about Owner/Occupants only in the private remarks should squash any complaint from those agents since its put right there in front of them).

I also wouldn't worry about the fair housing issue since an owner can freely discriminate against investors :)

Investors are not a protected class.  Q: Hi There HomeSmart Broker.  I have a listing owned by a Canadian woman who may choose not to sell to an investor because of tax withholding which is a considerable amount to her.  My question is twofold:  1.  Can I put wording on the MLS plano stating “no investors”?  If so, what would be the appropriate wording to use?  2. Could I be certain that I would not be liable to pay a co-broke commission in the event another agent presented a full price offer for an investor?  Thanks, 

I believe she could state in the MLS that the property will only be sold to an owner who will occupy the property, due to FIRPTA regulations.  Probably come up with some better language but something to that effect.  Just my opinion....Jane.

Adding to what Kyle stated...Seller could request the buyer sign the FIRPTA documents within 5 days (i.e.) of contract acceptance (or during inspection period).  Get it done early in the transaction.  Jane

Q: Can I exclude investors from buying my listing due to FIRPTA and the Owner Occupant Exemption?  Hi, there is a property my investor buyer is interested in within a development that I know for fact allows rentals.  Seller is Canadian and they are saying owner occupancy is required. I know they are likely saying this due to FIRPTA. Can they legally do that when the community allows rentals?   A: Hi X, One of the exemptions for a FIRPTA seller is when the buyer will live in the property (owner occupant).  The seller can legally require the buyer to be an owner/occupant, and require them to sign documentation regarding that (the name of the document is the FIRPTA Affidavit).  Investors are not a protected class, so the seller has the legal right to require that the buyer will be an owner occupant.


Buyer acknowledges and agrees that they will occupy the property as a full time owner/occupant.

Buyer agrees to execute the attached FIRPTA Buyer Affidavit simultaneously along with this Counter-Offer.   OR

Buyer agrees to execute and deliver to title the FIRPTA Buyer Affidavit within 3 days of contract acceptance or this contract shall be immediately cancelled with a full refund of earnest money to the buyer.  (Attachment-FIRPTA Addendum).

We are selling our home in Scottsdale, AZ.  We are not American citizens.  We have consulted with a tax professional and are clearly aware of the FIRPTA guidelines and requirements. We are able and willing to sell our house.  Knowing our FIRPTA options, we have chosen to sell our home for $300,000 or less, below current market value.  All other terms and conditions of our listing agreement shall remain in effect. 

Have I covered my bases with this statement?  Donna, that would be fine.  I talked with another one of our brokers Kyle, and he thought it would also be a good idea to state in an email to your clients that we also strongly recommend that their attorney review this as well to ensure there are no other liabilities we may not be aware of (ie, selling the home for less than fair market value).  Probably a very good idea.  Jeff.

FIRPTA:  We have a listing that will be subject to FIRPTA.  We've received an offer for $312,000, with the buyer also wanting to purchase some of the furniture on a separate bill of sale for $2500.  Would it be possible to counter the purchase price to be $300,000 to avoid FIRPTA and raise the price of the furniture to 14,500?  Would this be too risky- with the buyer potentially backing out of the furniture deal?  Just wanted to see if you had any thoughts before presenting the offer to the sellers,

Hi Sherry, other than the general mechanics of FIRPTA, I would not be comfortable giving advice regarding "manipulating"  the numbers to make a transaction FIRPTA vs NON-FIRPTA (for example, selling the property below fair market value).  My recommendation to you is to recommend to them to seek legal, tax and/or any other professional advice regarding that.  

FIRPTA:  X, I have attached a FIRPTA flyer for your review, it outlines the general process.  The ER listing agreement has language regarding FIRPTA, you may want to review that specifically with the seller(s): (sect 11g, line #181).  You will also check the box on the MLS Residential Input Form that FIRPTA may apply (special listing conditions section). There is also a question (#13) on the SPDS where the seller discloses FIRPTA.  Finally, there is a section in the pc which addresses FIRPTA: (4c, line #162). 





FIXTURE:  What is a fixture?  1) Method of Attachment 2) Agreement of the Parties 3) Intent of the Parties 4) Adaptability

Was it custom made for this property?

FLIPPER, RENOVATION, ER LANGUAGE WHEN LISTING AGENT:  “Seller states that permits were/were not required for renovation work.  If requested by Buyer, Seller agrees to provide Buyer with copies of all permits for all renovation work completed during Sellers ownership of property.  Seller states that costs of renovation were greater than/less than $1000.00.”


FLIPPER, WHEN REPRESENT BUYER:  “Seller agrees to provide Buyer copies of all permit(s) for renovation work completed during sellers ownership of property.  All permits to be provided during the inspection period along with a list of participating Contractors/Vendors.”  


FLIPPER LANGUAGE WHEN REPRESENT BUYER:  “Contractors lien protection shall be included in the title commitment and policy with any and all premiums paid by seller.”  THIS DOES NOT EXIST-SEE TITLE INSURANCE


FORECLOSURE PROCESS:  Q: I got a call last night from a man who said his wife filed divorce and left him with custody of their 3 little kids, she was not making the payments on the house even though he gave her the money to make the payments, he got notice of auction on 10/2/18 and the auction is scheduled 1/3/19 on court steps.  He owes about $108,000 plus attorneys fees of about $3000, the home is worth about $189,000 more or less depending on condition.  He wants me to list and sell it.  However, it is scheduled for Trustee's sale.  I'm attaching a copy of the notice.  Do you know how I can help him - he does not have the money to catch up payments, can he list it and sell and avoid the auction?  Let me know what you think.  Law firm is Tiffany & Bosco - owner said Leonard McDonald is the attorney.  I just want what is best for this man and his kids.  Any suggestions?  Does anyone you know help people in his situation?  

A: XYZ, The homeowner should reach out to his lender and explain to them what you have said here in your email.  He can try to convince them to delay the auction and allow him to sell the home at which time the lender will be paid in full.  Please confirm the payoff numbers to make sure he is not upside down, otherwise it will be a short sale.  You could take the listing now, if you get a contract the lender would be paid in full at COE.   The seller should still try to get a delay in the auction to allow the home to sell.  Otherwise, they will sell the home at auction, and he will be entitled to any "proceeds" once the creditors are paid in full.

FORECLOSURE STRIPPING:  Foreclosure Stripping is the process in which the owners of a foreclosed property will remove fixtures and fittings from the property in an attempt to salvage some of their investment. Malicious foreclosure stripping is done by home owners who render damage throughout the property to significantly decrease its value and cause resale to be almost impossible. Foreclosure stripping has been a growing trend in recent years [1] and has reached an all-time high in 2009 because of the economic downturn.


FORCED DECISION  “Buyer and Seller agree to extend buyers (Inspection Period, COE, Appraisal Period, etc) to xx/xx/xxxx.”


“If seller does not agree to extend buyers xxxx period, this Addendum shall serve as notice to seller that buyer is exercising their right to cancel this purchase contract dated xx/xx/xxxx, and request the immediate return of buyers Earnest Money, effective xx/xx/xxxx, and within buyers x days to give notice of property rejection and cancellation of this purchase contract.”




“Buyer and Seller agree to extend buyers Inspection Period to xx/xx/xxxx.”


“If seller does not agree to extend buyers Inspection Period, this Addendum shall serve as notice to seller that buyer is exercising their right to cancel this purchase contract dated xx/xx/xxxx, and request the immediate return of buyers Earnest Money, effective xx/xx/xxxx at 11:45pm and within buyers 10 day Inspection Period and delivers notice of property rejection and cancellation of this purchase contract.”


FRAUD:  Concealment of a pertinent fact to induce someone to act to their detrement. 


FSBO:  Dialogue with FSBO:  Agent xyz contacts the FSBO and explains to the owner that she/he represents buyers who would like to see the home.  She asks if the FSBO is cooperating with agents, that is, is the seller paying a commission to the agent who brings a ready willing and able buyer who closes on the purchase of the property.  The seller says that he is aware of the advantages of cooperating with agents and is willing to pay a commission.  Agent xyz tells the seller that he will send over an agreement that states that the seller agrees to pay a commission should the buyers named in the agreement purchase this home and that the seller understands that the agent is working for the buyers and not for the seller.


FSBO:  HomeSmart agents are not allowed to sell their home FSBO. ADRE says that your employing broker must reasonably supervise all of a licensee's real estate activities.  This means reviewing all of your listing and sales and rental contracts.  Therefore, you must create a HomeSmart transaction file for each real estate transaction that you are involved with either as the Listing Agent and/or Seller, Selling Agent and/or Buyer, or Landlord or Tenant.

FSBO:   Q: We have a buyer that wants to buy one of our friends home which is basically FSBO (not on MLS).  How do I start the paperwork on this/?  Just a contract and seller is unrepresented?... no MLS plano..

A: Hi Krista yes that would be fine.  If you're going to just represent the Buyer and the Buyer is paying you, you'll have the Seller sign the form called the Declination of Real Estate Representation that is on our website.  If you're representing the Buyer, but the Seller is paying you, you'll just need the Seller to sign the Unrepresented Seller Compensation Agreement.  For the MLS requirement you can just upload a Missing Paperwork form (you won't be fined of course) just to cover why we don't have that doc in the file.  Everything else will be the same as normal.



FURNITURE, PAYMENT DUE:                                                                                                                                                                

“Certified Funds in the amount of $x payable to Seller due at title company on or before COE.”


FURNITURE INCLUDED  “Purchase includes all furniture as seen on xxxxx with  no warranties, conveyed on a separate bill of sale at no monetary value.  Seller and buyer to agree on bill of sale during inspection period or seller to provide bill of sale during inspection period or bill of sale to be agreed upon during inspection period.”

FURNITURE INCLUDED:  “All furniture included as seen on xx/xx/xxxx.  Furniture to convey on separate bill of sale AS-IS with no warranties at no monetary value.  Bill of sale to be agreed upon and finalized during the inspection period.”



“Line x of purchase contract (and/or Line(s) xx of counter offer are hereby removed/deleted.  All furniture/personal items to convey by separate bill of sale (or separate written agreement).”


FURNITURE, SOME FURNITURE WILL NOW BE LEFT BEHIND BY SELLER:  The following items are being left behind at the convenience of the seller at no monetary value, in as-is condition and with no warranties: Washer, Dryer, Refrigerator, Wine Cooler, Pool Table. No value will be added to the sales price of the home.”