1031 Exchanges can be a very useful tool for investors. 1031 Exchanges are commonly used to defer capital gains taxes on the sale of an investment property. In all cases, a Qualified Intermediary would work with the title company in order to provide 1031 Exchange Documents to be executed, hold funds from the sale and then apply those funds to the next property purchased by the seller.
There are a good number of 1031 Exchange Companies that Erieview Title has worked with over the years. Old Republic Exchange Company is one of those. The video below provides a great overview of the 1031 Exchange Process and its benefits.
In addition, there is a brochure available here with additional information. As always, feel free to reach out to us! We are happy to connect you with a Qualified Intermediary that can help you or your client with questions they may have.
Picture this….you have the best new listing! In this market, it will definitely go into multiples. The sellers are foreign and live in Brazil. Logistically that complicates things a little with closing and communication, but you’ve got this! Is there anything else you should plan for?
YES!
FIRPTA – you should plan ahead and communicate with your seller right away.
If your seller is foreign, it is critical to advise your seller that any foreign person selling a U.S. real property interest should address FIRPTA requirements with their tax professional at the start of the selling process to prevent issues or delays at closing.
What is FIRPTA?
The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) When a foreign-owned U.S. real property interest is sold, the Foreign Investment in Real Property Tax Act (FIRPTA) requires that a tax equal to 10 or 15 percent of the “amount realized” by the foreign person upon disposition be remitted to the Internal Revenue Service (IRS), unless one or more exemptions apply to the seller on the transaction.
What is the withholding rate?
• When the property will be used by the buyers as a residence, the withholding rate of 10 percent applies provided the “amount realized” from the sale exceeds $300,000 but does not exceed $1,000,000.
• If the “amount realized” exceeds $1,000,000, the withholding rate is 15 percent.
• When the property will be used by the buyer as a residence, no withholding is required if the “amount realized” from the sale is $300,000 or less.
• When the property is not acquired to be the buyer’s residence, the withholding rate is 15 percent of the “amount realized” from the sale.
How can the real estate professional prevent closing delays?
• Advise foreign persons selling a U.S. real property interest to seek advice from a licensed and qualified tax professional.
• Let the title company know right away so they can prepare documents accordingly on their end.
How can a seller facilitate the process?
• Seek the advice of a licensed and qualified tax professional.
• Be proactive. Determine if there is an exception from withholding. Consider obtaining a withholding certificate from the IRS to determine what the seller actually owes. This could greatly reduce the amount withheld at closing. This process can take up to 90 days or more. Advise the seller to start this process early
Interested in the steps we as the title agency take with FIRPTA?
Please feel free to download the below document:
As always, reach out anytime you have a question regarding this or any other real estate scenarios! We love to help!
Location Surveys and Boundary Surveys
On February 2nd, we had the pleasure of partnering with Bill Feller from McSteen Land Surveyors. There was a ton of great information presented! Specifically, the differences between a Mortgage Location Survey and a Boundary Survey.
Here is a little Chart to assist in comparing the two*:
| Mortgage Location Surveys | Boundary Surveys |
Price | $185-275 | $1,400 + |
Accuracy | Plus or Minus ft | Plus or Minus .02 feet |
Turnaround | Several Days | Several Weeks |
Standards | Provides Substantial Proof that the property is there and within property lines for Title & Lending Purposes | Determines the boundary lines for the property owner’s use (sometimes these are necessary for the county’s use if a new legal description is required) |
Shows | -Boundary Lines according to the Legal Description -all about the title company provided information & identifying potential title issues | -Boundary Lines as calculated by Surveyor -all about the Surveyor research and calculations to determine boundary lines |
*Information taken from McSteen Land Surveyors, GIS Mortgage Location Surveys and Boundary Surveys presentation on 02/02/2023.
Feel free to reach out to reply to this email if you are interested in receiving a copy of the presentation for future reference. Also, if you or a client is asking for contact information for a surveying company, McSteen Land Surveyors are wonderful to work with.
McSteen Contact information: Email: orders@mcsteen.com | Number: 440.585.9800
Last, we hope you can join us for a CE Course on Thursday, February 23rd on Real Estate & Title Law from 10 am -12 pm. Reply to this email if you would like to come!
As always, please let us know should you have any questions regarding this topic!