Chicago Title FIRPTA Guide

A GUIDE TO PURCHASING AND SELLING A HOME IN ARIZONA

FIRPTA –– Does This Apply to You?

Foreign Investment in Real Property Tax Act

FIRP TA is a U.S . law governing the sale of real property by no n-resident aliens and fore ig n en titi es 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 NO

Is Seller recognizing a gain of more than 10%?

Does the Buyer have definite plans to use the property as his residence and sales does not exceed $300,000?

YES

Complete Buyer’s Declaration for $300,000 Residence Exception form

No

Buyer Requests 10% Withholding

• 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.

• Escrow provides an estimated Seller Statement YES

If so instructed, Escrow will withhold 15% pending receipt of Withholding Certificate.

Internal Revenue Code Provides: Withholding is not required if the Buyer acquires the property 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 two 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.

What You Need to Know

About FIRP TA Basics

When a for eign o wner g et s ready to sell, the y coul d b e subjec t t o u p to 1 5 % ( o f th e Sales Price) with o ld in g u n les s th e transactio n i s exemp t f ro m FI RPTA.

Mos t commo n exception : Th e Sale s Pric e i s $ 3 0 0 , 0 0 0 o r less. The B u y e r o r a s member o f th e family mu st hav e p lan s to resid e a t th e p ropert y fo r a t leas t 5 0 % o f th e n u mbe r o f d ay s th e p roperty i s u se d b y any person d u rin g each o f th e fir s t two twelve mo n th p eriod s afte r sale.

Potential Exceptions

Seller p rovides a Cer tificate showing th ey are n o t a f o reign seller. Seller r eceiv es a withholding certificate f ro m th e IR S ex cu sin g with h o ld in g .

Funding

All funds d ep o sited in escrow must b e b y wire tr an sfer. Ou tside o f US Wire Transfers/Swif t Fee: Inter n atio n a l transfers are executed th rough SWIFT – – So ciety f o r Worldwide Interbank Finan cial Telecommunicatio n There is an additional ch arge for this ty p e of tran sfer. Typically the char g e is a flat rate and d o es n o t ex ceed $100. The charge i s d ed u cted from th e wired funds an d v aries fr o m b ank to b ank, so we recommen d th at our clients wir e an additional $ 1 0 0 wh en wiring from outside o f th e U.S.

Forms

Forms y ou m a y need are available at ww w.I RS. g o v and so me m ay be complete d on-li n e.

Application for IRS Individual Taxpayer Identification Number. w-7

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

Arizona

Good Funds Law

Ariz o n a law requ ir es that “escrow agents n o t d isb urse money from an escr o w accoun t u n til fund s related to the transaction have been deposited and available." ARS 6-8 34 The law specifies which forms of payments are acceptable for deposit.

Th e avail ab ilit y of f unds for use in escrow is based on funds b eing depos it ed in our ba nk for the sp ec ified d a ys shown below. The d a ys refer t o Bu sine ss Da y s w hich are defined as calendar days other than Saturday or Sunday, and excluding most major holidays.

same DAY

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

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

next DAY In State

• US Treasury Checks.

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

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

• Sate, County and Municipal Government Checks

second DAY In State

• See Caution

• Credit Union and Travelers Checks

fifth DAY

• See Caution

• All other Money Orders (Non-US Postal).

dr afts

•NO disbursement until funds Received and Collected!

BUSINESS DAY:

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

FOREIGN CHECKS

It is the policy of Chicago Title NOT to accept foreign checks into escrow. This includes foreign checks paid through a US Bank. All money coming from outside the United States must be sent via wire transfer.**

THIRD PARTY 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

Caution

Due to the length of time it takes to receive notice from banks on NFS and returned items, Personal, Corporate and Money Market checks will need written verification from the customer’s bank that the check has paid is required if 10 days have not elapsed since the funds were deposited in escrow.

** 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.

Guide To

Closing Costs

The Seller can generally expect to pay:

• Ow ner’s ti tl e insuranc e premiu m

•Real estate commissio n

• Ha lf of the esc row fe e

•Notary fess (if a p pli cable)

• Any loan fees requi red b y Bu yer ’s lende r (ac co rding to contract)

• Payoff of all l oan s i nc lud ing a ccrued i nterest, statement fees, r e conveya nc e fee s, and any pr epa yment pen a ltie s

• Termite in sp ection (ac cordin g to contrac t)

•H ome warranty (according to contract)

•Any judgements, tax liens, etc. against the Seller

•R eco rdin g charges to clear al l do cu me nts of record against t he Seller

• Tax proration fo r any taxes unp aid at ti me of transfer of title

• Any unpaid hom eowner’s associat ion du es

•Any bonds or assessme nts (according to contract)

• Any an d a ll delinquent ta xes

The Buyer can generally expect to pay:

•L ender’s title poli c y pr e miu ms

• Hal f of th e escrow fee

•D ocument pre paration ( if a pplicable )

•Nota ry fees ( if a pplic able)

•R ecording charges f or all do c uments i n Buyer’s name

• Termite inspecti o n (accor di ng to contrac t)

• Homeowners’ associat io n transfer fee (according to contract )

• All new loan c h arges

• Interest on n ew loan from d a te of fun di ng to 3 0 day s prior to first payment da te

• Hom e w arran ty (according to co n tract)

• Home owner's insurance premium for first year

• All pre-pa id d e posits f or ta x es, i nsurance, MI P, etc.

The above info rmation is n ot nece ssarily all-inclusi ve and all the se rvi ces fo r which payment may be no n-allo wable may not be i dent ifi ed.

Take Title in Arizona Ways to

Community Property

• Requires a valid marriage between two persons.

• Each spouse has an undivided one-half interest in the estate.

Joint Tenancy With the Right of Survivorship

• Parties need not be married; may be more than two joint tenants.

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

• One spouse cannot partition the property by selling his of her interest.

• Requires signatures of both spouses to convey or encumber.

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

• 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.

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

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

• Estate passes to surviving joint tenants outside of probate.

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

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

Community Property With the Right of Suvivorship Tenants in Common

• Requires a valid marriage between two persons.

• Each spouse has an undivided one-half interest in the estate.

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

• Requires signatures of both spouses to convey or encumber.

• Estate passes to the surviving spouse outside of probate.

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

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

• Parties need not be married; may be more than two tenants.

• Each tenant in common holds an undivided fractional interest in the estate. Can be disproportionate; e.g., 20% and 80%, 60% and 40%, etc.

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

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

• 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.

• Each share has its own tax basis.

Not e: Arizona is a co mm unity p ro perty st ate. Pr ope rty acq ui red by a husband and wife is presumed to be co mmunity prope rty unless legal ly sp ecified o th er wi se . Tit le may b e he ld as “Sole and Se pa rate”. If a ma rr ie d person acquires title as sole and separate, his or her spouse must execute a disclaimer deed to avoid the presumpt ion of community property. Pa rtie s may chos e to hold titl e i n the name of an entity; e.g ., a corp or at ion , a lim ited li abi lity compa ny, a pa rtners hip (general of limited), or a trust. Each methods of taking title has certain significant legal and tax consequences. Therefore, you are encouraged to obtain advice from an attorney or other qualified professional.

About Chicago Title Agency

As a leade r i n the Metropolitan PH OE NI X re al estate co mmu nity since the 1960s , and as one of the l arg est tit le o pe rat ions in the Sou thwe st , C hicago Tit le is uni quely capable and positioned to offer our cu st ome rs the ver y best and most comple te se rvice. As a dire ct o pe rati on o f Chicago Title, we en joy the strength o f our association wi th the largest title ins urer i n the world combine d with the same local k no wledg e, e xperience , and decision-maki ng th at has marked our su ccess Our profession al staff is wi dely r eco gni zed f or the de pth of k now ledge and experience brought to ea ch transaction . Our Co mmitmen t to customer se rvice is exemp lified by our co nstant refrain: “Attitude i s Eve rything” . Wit h offices located throughout Ma ricopa County, Ch ic ago Tit le i s the premier choice in Arizona’s escrow and title insurance industry.

Str e n g ths

Ch icago Title has a wel l-est ab lished repu tation in our fiel d. Ma ny of our e mpl oyees have b een with th e comp any fo r 20 – 3 0 yea rs, providing a n u n-pa rallele d re ser vo ir of profess io na li sm. As on e of the few Arizona title companies to have weathered all the economic storms from the 1960s through the present d ay, C hicago Tit le ha s a track record a s one of the most de sira bl e title comp an ies at whi ch to be employed We can and do b oast about the qualit y of k nowledge and ser vice offered at every Chicago Title location.

Our ex ecut iv e staff consists of long-term , successful peopl e who hav e rise n through the r anks –yes, even from the mailroom – by de monstr ati ng uncommon wisdom, customer care, a nd pursuit of solutions.

As an agent of several major underwriters, we have the ability to provide your title insurance in the most co mpetit ive environment . We h ave the flexi bility to use t he underwriter th at can best meet your needs in terms of underwriting, problem-solving, and pricing.