When it comes to real estate transactions involving foreign sellers, FIRPTA (the Foreign Investment in Real Property Tax Act) is not something to take lightly. One of the most common—and costly—mistakes we see is failing to properly screen sellers at the start of the transaction. A small oversight can lead to major tax implications, delays, or liability for the buyer or their agent.
Why Screening Matters
The purpose of FIRPTA is to ensure that foreign individuals pay tax on the sale of U.S. property. But here’s the catch: if the seller is considered a “foreign person” and the buyer fails to withhold the required funds, the IRS can come knocking on the buyer’s door instead. That’s why screening isn’t just a formality—it’s a form of protection.
Early Identification Is Key
The earlier you know the seller’s FIRPTA status, the better. Screening at listing—or as soon as a contract is executed—gives everyone involved time to prepare for what comes next.
What You Should Be Asking (Without Getting Too Deep)
While we won’t give away our whole checklist (that’s what we’re here for!), here are a few things you should be thinking about:
• Does the seller have a Social Security Number or ITIN?
• Are they filing taxes in the U.S.?
• Is the property held by an individual, trust, or LLC?
• Have you seen a valid government-issued ID?
These answers aren’t always black and white—and they’re definitely not always straightforward. That’s why trying to DIY the screening process can get risky fast.
Avoid Assumptions
Don’t rely on casual conversations or gut feelings about a seller’s citizenship status. Proper documentation is a must, and any uncertainty should be addressed by professionals who know FIRPTA inside and out.
Let the Experts Handle It
At Total FIRPTA, we specialize in navigating the complexities of FIRPTA compliance from start to finish. Whether you’re a title agent, real estate professional, or buyer, our team can help you identify risk early and ensure all IRS requirements are met—no stress, no surprises.
Need Help Screening a Seller?
Let’s talk. One quick conversation can save you from hours of paperwork—or worse, costly mistakes.
📞 Contact Total FIRPTA today and let us take it from here.