Chicago Title FIRPTA Guide

A R I ZON A INTERNATIONAL REAL ESTATE GUIDE TIPS FOR BUYING AND SELLING IN ARIZONA

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17 303

101 101

Peoria 101

Paradise Valley Glendale 17

101

303

101

Scottsdale

Phoenix 10

10

202

10 17 10

202

Mesa

Tempe 60

60

60

10 101

202

Gilbert Chandler

202

202

C HI C AGO T IT LE AGE NCY LO CAT IO N S TEMPE

DESERT RIDGE

4500 S. Lakeshore Dr. #200

20860 N Tatum Blvd #140

(480) 874-7045

(602) 667-1230

CHANDLER

SCOTTSDALE RAINTREE

2121 W. Chandler Blvd. #200

8800 E. Raintree Dr. #230

(480) 899-0201

(480) 675-4899

GILBERT

SCOTTSDALE PRINCESS

335 E. Germann Rd. #101

8501 E. Princess Dr. #110

(480) 539-6854

(480) 538-1940

ESPLANADE

SCOTTSDALE - MAIN OFFICE

2398 E. Camelback R. #110

7500 N. Dobson Rd. #150

(602) 667-1046

(602) 667-1000

BILTMORE

GOODYEAR

2398 E. Camelback Rd. #110 (602) 553-4806

1300 S. Litchfield Rd. #220-A (623) 434-9205

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F IR P TA - DOES THIS APPLY TO YOU? FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT FIRPTA is a U.S. law governing the sale of real property by non-resident aliens and foreign entities when the property is located within the United States.

IS SELLER A US CITIZEN OR A US RESIDENT?

YES Complete Certification of Non-Foreign Status

Is SELLER recognizing

NO

Does the BUYER have definite plans to use the property as his residence and sales

DOES NOT EXCEED $ 300,000?

a gain of more than 10%?

NO Buyer Requests 10% Withholding

YES See your CPA or tax attorney regarding application form 8288B for an IRS Withholding Certificate Carefully review FIRPTA Withholding Agreement. All parties, including seller’s tax professional, must sign this agreement.

YES Complete Buyer’s Declaration for $300,000

Escrow provides an estimated Seller Statement

Residence Exception form

IF SO INSTRUCTED, ESCROW WILL WITHHOLD 15% PENDING RECEIPT OF WITHHOLDING CERTIFICATE. Internal Revenue Code Provides: Withholding is not required if the property is for use as a home and the sales price is not more than $300,000. The Buyer or a member of their family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first 12 month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant.

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ABOUT FIRPTA

W HAT YOU NE E D TO KNOW BASICS When a foreign owner gets ready to sell, they could be subject to up to 15% (of the sales price) withholding unless the transaction is exempt from FIRPTA. Most common exception: The Sales Price is $300,000 or less. The Buyer or a member of the family must have plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first twelve month periods after the sale.

POTENTIAL EXCEPTIONS Seller provides a Certificate showing they are not a foreign seller. Seller receives a withholding certificate from the IRS excusing withholding.

FUNDING All funds deposited in escrow must be by wire transfer.

Outside of the US Wire Transfers/Swift Fee: International transfers are executed through SWIFT - Society for Worldwide Interbank Financial Telecommunication. There is an additional charge for this type of transfer. Typically the charge is a flat rate and does not exceed $100. The charge is deducted from the wired funds and varies from bank to bank, so we recommend that our clients wire an additional $100 when wiring from outside of the U.S.

FORMS Forms you may need are available at www.IRS.gov and some may be completed on-line.

W-7. . . . . Application for IRS Individual Taxpayer Identification Number.

8288-B. . Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests.

RIGHT TO SEEK LEGAL AND FINANCIAL ADVICE. DUE TO THE COMPLEXITY OF THE TAX LAWS, AND THE INTEREST AND PENALTY PROVISIONS THAT MAY BE ASSESSED, IT IS RECOMMENDED THAT BOTH BUYER AND SELLER CONSULT WITH THEIR RESPECTIVE ATTORNEYS OR FINANCIAL ADVISORS AS TO THEIR OBLIGATIONS THEREUNDER, IF ANY, PRIOR TO THE CLOSE OF ESCROW.

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A R I ZON A G O O D F UND S LAW Arizona law requires that “escrow agents not disburse money from an escrow account until funds related to the transaction have been deposited and available.” ARS - 6-834. The law specifies which forms of payments are acceptable for deposit.

The availability of funds for use in escrow is based on funds being deposited in our bank for the specified days shown below.

The days refer to Business Days which are defined as calendar days other than Saturday or Sunday, and excluding most major holidays.

SA M E DAY

FOREIGN CHECKS

Cashier, Certified, Tellers and Official Checks drawn on FDIC Insured Institution.

It is the policy of Chicago Title NOT to accept foreign

Checks made by an affiliate of a state or federally regulated depository institution where the check is drawn on the affiliated depository.

through a US Bank. All money coming from outside the

NE X T DAY IN S TATE US Treasury Checks.

Postal Money Orders (for other money orders see Fifth Day)

checks into escrow. This includes foreign checks paid United States must be sent via wire transfer. **

T HIRD PA RT Y CHECKS Chicago Title does NOT accept third party checks. Third party checks are drawn on a non-financial account, payable to a payee other than Chicago Title Agency.

Federal Reserve, Federal Credit Union, and Federal Home Loan Bank Checks.

State, Country, and Municipal Government Checks.

SE CO N D DAY IN S TATE See Caution Credit Union and Travelers Checks

FI F T H DAY See Caution All other Money Orders (Non-US Postal).

D RA F T S NO disbursement until funds Received and Collected!

CA UTIO N

Due to the length of time it takes to receive notice from the bank regarding NSF and returned items, we require written verification from the customer’s bank that the check has been paid for Personal, Corporate and Money Market checks, if 10 days have not elapsed since the funds were deposited into escrow.

B US IN E S S DAY

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Funds are potentially available on the Business Day indicated above. A business day is defined as a calendar day other than Saturday or Sunday, and excluding most major holidays. If January 1, July 4, November 11, or December 25 fall on a Sunday, the next Monday is excluded from the definition of a business day. Note that individual banks may require additional hold periods longer than shown above. Late-day may be considered deposited on the next business day.

** Intermediate Banks handling International Wire Transfers charge a Fee. Insure that your wire includes this fee or it will come in short on funds which will delay the disbursement.

CLOSING COSTS

The below information is not necessarily all-inclusive and all the services for which payment may be non-allowable may not be identified.

OWNER’S TITLE INSURANCE PREMIUMS REAL ESTATE COMMISSION HALF OF THE ESCROW FEE NOTARY FEES (IF APPLICABLE) ANY LOAN FEES REQUIRED BY BUYER’S LENDER (ACCORDING TO CONTRACT) AYOFF OF ALL LOANS INCLUDING ACCRUED INTEREST, STATEMENT FEES, P RECONVEYANCE FEES, AND ANY PAYMENT PENALTIES TERMITE INSPECTION (ACCORDING TO CONTRACT) HOME WARRANTY (ACCORDING TO CONTRACT) ANY JUDGMENTS, TAX LIENS, ETC. AGAINST THE SELLER RECORDING CHARGES TO CLEAR ALL DOCUMENTS OF RECORD AGAINST THE SELLER TAX PRORATION FOR ANY TAXES UNPAID AT TIME OF TRANSFER OF TITLE ANY UNPAID HOMEOWNER’S ASSOCIATION DUES ANY BONDS OR ASSESSMENTS (ACCORDING TO CONTRACT) ANY AND ALL DELINQUENT TAXES

TH E SEL L ER CA N G E N E RA L LY E XP E C T TO PAY :

GUIDE TO

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TH E BUYER CA N G E N E RA L LY E XP E C T TO PAY : 8

GUIDE TO

CLOSING COSTS

The below information is not necessarily all-inclusive and all the services for which payment may be non-allowable may not be identified.

LENDER’S TITLE POLICY PREMIUMS HALF OF THE ESCROW FEE DOCUMENTS PREPARATION (IF APPLICABLE) NOTARY FEES (IF APPLICABLE) RECORDING CHARGES FOR ALL DOCUMENTS IN BUYER’S NAME TERMITE INSPECTION (ACCORDING TO CONTRACT) HOMEOWNER’S ASSOCIATION TRANSFER FEE (ACCORDING TO CONTRACT) ALL NEW LOAN CHARGES INTEREST ON NEW LOAN FROM DATE OF FUNDING TO 30 DAYS PRIOR TO FIRST PAYMENT DATE HOME WARRANTY (ACCORDING TO CONTRACT) HOME OWNER’S INSURANCE PREMIUM FOR FIRST YEAR ALL PRE-PAID DEPOSITS FOR TAXES, INSURANCE, MIP, ETC.

WAYS TO TAK E T I T L E I N A R I ZO N A COMMUNITY PROPERTY

JOINT TENANCY WITH THE RIGHT OF SURVIVORSHIP

COMMUNITY PROPERTY WITH THE RIGHT OF SURVIVORSHIP

TENANCY IN COMMON

Requires a valid marriage between two persons

Parties need not be married: may be more than two joint tenants

Requires a valid marriage between two persons

Parties need not be married: may be more than two tenants in common

Each spouse holds an undivided one-half interest in the estate

Each joint tenant holds an equal and undivided interest in the estate, unity of interest

Each spouse holds an undivided one-half interest in the estate

Each tenant in common holds an undivided fractional interest in the estate and can be disproportionate (ie: 20%-80% or 60%-40%)

One spouse cannot partition the property by selling his or her interest

One spouse cannot partition the property by selling his or her interest

One joint tenant can partition the property by selling his or her joint interest

Each tenant’s share can be conveyed, mortgaged or devised to a third party

Requires signatures of both spouses to convey or encumber

Requires signatures of all joint tenants to convey or encumber the whole

Requires signatures of both spouses to convey or encumber

Requires signatures of all tenants to convey or encumber the whole

Each spouse can devise (will) one-half of the community property

Estate passes to surviving joint tenants outside of probate

Estate passes to surviving spouse outside of probate

Upon death the tenant’s proportionate share passes to his or her heirs by will or intestacy

Upon death the estate of the decedent must be “cleared” through probate, affidavit or adjudication

No court action required to “clear” title upon the death of joint tenant(s)

No court action required to “clear” title upon the first death

Upon death the estate of the decedent must be “cleared” through probate, affidavit or adjudication

Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death

Deceased tenant’s share is entitled to a “stepped up” tax basis as of the date of death

Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death

Each share has its own tax basis

NOTES ON “SOLE AND SEPARATE” TITLE IN ARIZONA Arizona is a community property state. Property acquired by a husband and wife is presumed to be community property unless legally specified otherwise. If a married person acquires title as “Sole and Separate”, his or her spouse must execute a disclaimer deed to avoid the presumption of community property. Parties may choose to hold title in the name of an entity, e.g. a corporation, a limited liability company, a partnership (general or limited), or trust.

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N OT E S

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FOR ALL TYPES OF TRANSACTIONS, WE'VE GOT YOU COVERED.