As a tax professional specializing in FIRPTA (Foreign Investment in Real Property Tax
Act), I work exclusively with foreign sellers. Over the past few months, I’ve seen a
notable increase in Canadian clients looking to sell their U.S. real estate—and I’m
sure I’m not alone. If you’re a title agent, real estate attorney, or real estate agent,
this shift may already be showing up in your transactions, or it will soon.
So why the surge in sales?
Recent headlines point to a mix of economic and political drivers: currency fluctuations, potential tax changes, and general uncertainty around immigration and investment policy in the U.S. While Canadians are selling for a variety of reasons, some are making the decision to sell solely based on the political unrest and divisiveness they perceive in the U.S. In fact, we’ve seen Canadian sellers drastically reduce their listing prices, in some cases by more than 20%, in hopes of avoiding FIRPTA altogether or simply to exit the market quickly. Many are operating from a place of fear or confusion, which can lead to rushed decisions and unnecessary financial loss.
Regardless of whether we agree with their perspective, their concerns are real to them. As real estate professionals, we can help by approaching these conversations with patience and understanding. A little empathy can go a long way in building trust and ensuring a smooth transaction.
Here are a few ways to support these sellers during the process:
1. Don’t mock or minimize their concerns: Even light-hearted jokes about politics can alienate a nervous seller.
2. Ease their fears through education: Help them understand the FIRPTA process and what to expect at closing.
3. Reassure them with professionalism: Let them know they’re in good hands by connecting them with experienced FIRPTA professionals.
4. Respect their timeline: Sellers who are motivated by anxiety may want to move quickly. Be ready to help facilitate a faster process.
5. Communicate clearly and often: FIRPTA can be overwhelming. Regular updates build trust and keep the deal on track.
By being sensitive to their situation and knowledgeable about FIRPTA, not only do you protect the transaction, but you position yourself as a trusted partner who can navigate complex cross-border deals.
Helping Sellers Prepare for the FIRPTA Process
Once you’ve identified that FIRPTA applies to the sale, early preparation can make a major difference in how smoothly the transaction (and any potential refund) goes.
Here are several steps you can encourage your Canadian (or other foreign) sellers to take right away:
1. Have them contact a FIRPTA expert as soon as possible to understand their options.
2. Gather documentation for capital improvements: Receipts for renovations, major repairs, or improvements can reduce taxable gain and maximize their FIRPTA refund.
3. Use time in the U.S. wisely: If they’re in the country, they can meet with a tax professional who is a Certified Acceptance Agent (like me!) to certify passports on-site. This avoids the need to send original documents to the IRS when applying for an ITIN.
4. Get clarity on the ownership structure: Determine if the property is held in a personal name, a foreign entity, or a trust. Each has different implications for withholding and filing requirements.
5. Review closing timelines with FIRPTA in mind: Delays or rushed closings can leave money on the table or create compliance headaches.
The bottom line?
FIRPTA doesn’t have to be a roadblock—it just requires the right planning and the right professionals. By staying informed and proactive, you can help your Canadian clients – even the most nervous ones – make smart and confident decisions.