CANADIANS

CANADIANS

First, it must be said that for a non-U.S. citizen, buying real estate in the U.S. is much easier than selling.

One of the biggest challenges for non-U.S. seller vs. buyers is the need for a notary. Sellers must gain access to a U.S. notary either in the U.S. or at a foreign consulate to notarize the grant deed.  When buying this is not necessary.

If a seller is not a US citizen they must obtain a taxpayer identification number (ITIN). If they do not yet have one they can now only be obtained once you have a signed RPA (Residential Purchase Agreement).  It takes approximately 6 weeks to get it one.

There is 10% or 15% withholding of the TOTAL SALES PRICE for the IRS and 3.3% for the Franchise Tax Board State of California (FTB).  The withholding amount in determined by the sale price of the house and how the buyer intends to use the property.

If the seller’s do not have a gain they can get a waiver from the State (FTB) by completing the 593E form that will be provided by escrow.

For the IRS they can apply for a waiver (but it must be done before the close of escrow) by completing information and sending it to them but that can take up to 90 days or more  to obtain their consent for a reduction in the withholding or a complete waiver. 

The withholding can be held in escrow until the waiver is obtained, however both buyer and seller must agree to it and an additional $5,000.00 must be held in case of any penalties. Once the waiver is received or a letter that the amount is reduced escrow will pay those funds to the IRS or refund to the seller accordingly.