Here's what I see happening in the Las Vegas housing market, grant you this is my opinion formed from selling Real Estate full-time in the Vegas Valley for over 16 years.
Things are kinda sideways and a few people are scrathing their heads saying hey what's going on with the FIRTA clause when buying and selling in Vegas. First of all, like any industry there tends to be trends. You know a flow, prices go up then they drop. Well, I've seen something escalating and that is sellers selling their property with the FIRTA clause. What is FIRTA? Foreign Investment in Real Property Tax.
FIRTA is the disposition of a United States Real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests.
A disposition means “disposition” for any purpose of the Internal Revenue Code. The meaning of disposition is similar to the action of distributing or transferring property or money to someone, in particular lwhich may include but is not limited to a sale or exchange, liquidation, redemption, gift, transfers,. So buyers purchasing United States real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 15% (10% for dispositions before February 17, 2016) of the amount realized on the disposition (special rules for foreign corporations).
In a majority of cases: the transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person/persons and you fail to withhold, you may be held liable for the tax. For cases in which a United States business entity such as a corporation or partnership disposes of a United States real property interest, the business entity itself is the withholding agent. I know this gets a little bit confusing and or complicated.
Here in Las Vegas it's handled through the title company. Thank goodness they are on top of the changing Las Vegas market.
FIRTA in Las Vegas is on the rise. I am guessing it is throughout the U.S. I have had several buyers buy from FIRTA sellers. The buyer in most cases is required to sign a form stating they will live in the home for 2 years.
This means a big deal when it comes to investors purchasing properties. Cause in my understanding , they can't buy these properties. So, they are limited to what's avaible out there for sale that aren't FIRTA sales and our INVENTORY is so Low. How low can it go?.
Just another learning curve for the general public and everyone involved in the Housing market knowledge department.
Sorry for any typos,
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