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Contact lawyer before purchasing real estate from a foreign seller

November 17, 2017
By ERIC FEICHTHALER - Real Estate Law , Cape Coral Daily Breeze

Dear Mr. Feichthaler:

We are in the process of negotiating the purchase of a home in Cape Coral. The seller is from Canada, and used it as a winter home only, so it is in great condition. Since the seller normally pays for title, he is also choosing the title company, which he says is brand new. Should we have any concerns about using a new company?

- Richard and Mary R.

Dear Richard and Mary:

Law firms and title companies play a vital role in real estate transactions. The owner's title policy provides you protection if it is later discovered that there is a defect in your title. These defects occur more frequently than one would imagine, either through improperly signed deeds, incorrect legal descriptions and other mistakes the closing agent may make. Without title insurance, you may find your only recourse is against the previous owner, who may be unavailable, or in the case of a foreign seller, unreachable. Regardless of the longevity of the company, I recommend that the parties research carefully all parties in the transaction. If a law firm or title company is often being sued for negligence, this is a company to stay away from. If the seller is proposing to use a company that has red flags like this, you can make a requirement of the closing for it to occur elsewhere, where both parties feel confidence.

The issue that is of most concern in this matter is the foreign seller. As discussed in a previous column, foreign sellers of real estate are required to have 15 percent of their gross sales price withheld and sent to the IRS, which is applied against their taxable income. This is where using an experienced law firm or title company is key. If the FIRPTA withholding is mishandled, it is the BUYER that is responsible for interest, penalties and potentially the entire amount itself. I have had several clients that have closed with local title companies where the withholding was mishandled, leading to IRS claims of lien. In one case, an unsuspecting buyer had their Social Security check garnished!

In any case where a buyer is purchasing real estate from a foreign seller, we recommend seeking legal counsel to ensure the buyer's interests are protected. There are several steps that can be taken to make sure the IRS doesn't come knocking on your door, but some of these require amendments to the initial contract, before being signed.

In conclusion, although it is recommended that any buyer seek legal counsel before entering a real estate contract, it is particularly important when purchasing real estate from a foreign seller.

Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continued his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest from 2011-2015, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.

 
 
 

 

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