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UT Newsletter

December 2020

News from Within Universal Title

I hope that this finds each of you happy and healthy as we approach the new year.  I am sure each of you has your own set of stories from 2020, some good and some maybe not so good.  As I reflect on 2020, the year definitely had its challenges and I will not be too sad to have it behind me, but it was also an incredible year in so many ways.  I was so impressed by how quickly the real estate industry pivoted back in March and remained focused throughout a very busy summer season which has extended well into the fourth quarter.  Whether it was virtual open houses, working from home, increased hygiene procedures or electronic settlement signings, the real estate agents, settlement companies, lenders and basically every vendor involved in a real estate transaction had to change a system or process.  What I witnessed was that each and every person involved managed to do so with professionalism and the single focus of doing whatever it took to get the deals to the table.  

At Universal Title, this year was not just about reacting to the exterior forces for the short term.  Instead, we took the time to reflect on the changes of a post-COVID world, to reevaluate our standard operation systems and to take advantage of what we learned to make our operation stronger for the future.  While we will always prioritize in person service and an exceptional settlement experience for our clients, we are not shying away from embracing a more virtual workforce for the more administrative aspects of our operation.  Over the past 9 months, we have established a virtual pre-processing team and a centralized virtual title department both of which will continue to grow in the new year.  We have also been able to retain exceptional processing talent by expanding our remote work opportunities.   As we enter 2021, our focus will be on continuing to provide support to our settlement teams so that they can in turn deliver a superior settlement product.  

Before this year comes to a close, I want to thank all of our clients who have trusted us this past year.  We appreciate each and every one of you and if there is ever anything that we can do to assist you or your business I hope that you will reach out.  However you may be celebrating this holiday season, I hope that it is filled with love and moments of joy!  Happy Holidays and Happy New Year!


Jennifer Mason Halsted
President

Education

First Real Estate Property Tax Act of 1980 (“FIRPTA”)

Under some circumstances, the IRS imposes a tax on transactions where a foreign  person is selling real estate.  It is important to have a working understanding of when the Foreign Investment in Real Estate Property Tax Act of 1980 (“FIRPTA”) applies

  1. Who is a “Foreign Person” under FIRPTA?   

In order to determine if the transaction is taxable under FIRPTA, the first question you have to ask is whether the “transferor”, that is the person or entity selling the property, is a “Foreign Person” as that term is defined by the IRS 

  1. “A Foreign Person is a nonresident alien individual, foreign corporation that has not made an election under section 897(i) of the Internal Revenue Code to be treated as a domestic corporation, foreign partnership, foreign trust, or foreign estate. It does not include a resident alien individual.”  https://www.irs.gov/individuals/international-taxpayers/definitions-of-terms-and-procedures-unique-to-firpta#foreign

 

  1. Who is a nonresident alien?  “A nonresident alien is an alien who has not passed the green card test or the substantial presence test.”  https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens
        • Green Card Test: 
        • “Are you an “immigrant” (Lawful Permanent Resident) of the United States under the immigration laws of the United States? Aliens who are Immigrants are Resident Aliens of the United States for tax purposes, under the condition that they spend at least one day in the United States.” https://www.irs.gov/individuals/international-taxpayers/the-green-card-test-and-the-substantial-presence-test
        • What is the substantial presence test? 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
            • All the days you were present in the current year, and
            • 1/3 of the days you were present in the first year before the current year, and
            • 1/6 of the days you were present in the second year before the current year. https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test
  1. There is an exception for No Withholding (i.e., no tax!): 
        • The sale is less 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.” https://www.irs.gov/individuals/international-taxpayers/exceptions-from-firpta-withholding
        • An affidavit must be signed at closing by the Buyer attesting to these facts.  This is known as a FIRPTA Affidavit.  
  1. Amount to be Withheld
      • 10% Withholding of Contract Price
        • If the sale is over $300,000 but less than $1,000,000.
        • 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.” 
        • An affidavit must be signed at closing by the Buyer attesting to these facts.  This is known as a FIRPTA Affidavit. 
      • 15% Withholding of Contract Price: 
        • The property is over $1,000,000 (there are no exceptions to this).
    • If the 10% or 15% Withholding applies, then the Seller, Buyer or Buyer’s agent can apply for a Withholding Certificate with the IRS in order to adjust the amount that is withheld.  These Withholding Certificates are completed when a transaction closes and are based on a variety of categories. 
      https://www.irs.gov/individuals/international-taxpayers/withholding-certificates

In practice, if someone is considered a non-resident alien, and if the specific transaction does fall within one of the categories above, it is advisable to speak with a tax professional about the tax implications and under what way a Withholding Certificate could be sought.        

  1. What are the Purchaser’s Obligations under FIRPTA?
    • The purchaser is ultimately responsible for the FIRPTA withholding.  This means that if the withholding is not handled correctly, the IRS can pursue the Buyer after closing for the full 10%/15% (whichever applies) of the sales price, in addition to fines, penalties and interest.  
    • FIRPTA tax is ultimately the buyer’s responsibility.   

Kelly Satterwhite, Esq.
Managing Attorney, Old Town Office 

Social Media Tip

Since its original launch in 2010, Instagram has quickly become one of the most popular social media platforms on the planet with over 1 billion monthly users. Due to its size, Instagram has also become a hugely profitable marketing tool across all sectors including real estate. Instagram’s own marketing statistics have stated that roughly 800 million users follow business profiles, and 25 million business profiles are followed by 80% of all Instagram users. (WOW!) 

Here are some tips for increased engagement on your own page:

1. Stay consistent with your posts (ie. daily, bi-weekly etc.)
2. Create live stories that are honest and reflect your personal lifestyle. People want to know who you really are!
3. Share your goals and mission statement. Your followers want to support you!
4. Share other businesses you respect and tag them frequently.
5. Ask questions of your followers and create back and forth dialogues on your page.
The more your followers can relate to you the more likely they are to like your posts and share with others.

Tech Tip brought to you by the Universal Title Sales Team
Tip Presented By:

 

Nikki Sullivan
Director of Business Development & Sales
Arlington & Old Town

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