Foreign Sellers & FIRPTA: What Realtors Should Flag Early

If your seller is not a U.S. citizen, the Foreign Investment in Real Property Tax Act (FIRPTA) may apply—and that can trigger federal withholding requirements at closing.

The IRS requires that a portion of the sale proceeds be withheld unless proper forms and exemptions are submitted in time. Many agents (and sellers) don’t realize this until it’s too late.

FIRPTA issues are fixable—but only if we catch them early.

15% Withholding May Apply
If FIRPTA kicks in, 15% of the sale price must be withheld at closing. That’s not negotiable—and if it's missed, the buyer could be on the hook.

Exemptions Require Paperwork

Sellers can apply for exemptions or reduced withholding, but that requires IRS forms submitted in advance.

Buyers Can Be Liable

If the correct forms aren’t filed and withholding isn’t done, the buyer becomes liable for the tax. Most don’t know this—and they won’t appreciate the surprise.

Why This Matters for Agents:

• FIRPTA delays closings and frustrates both sides of the deal.

• Many foreign sellers have no idea it applies to them.

• If the title company isn’t informed early, we may not be able to help in time.
  

🔑 Quick Tip for Realtors:

Ask every seller up front: “Are you a U.S. citizen or permanent resident?” If not, FIRPTA might apply. Let us know right away so we can walk you through the process.

Have a listing with a foreign seller? MG American Title will help you stay compliant and avoid surprises.