Escrow & Title
FIRPTA (Foreign Investment in Real Property Tax Act) requires that when a foreign person sells U.S. real property:
AThe sale must be approved by the IRS
BThe buyer must withhold a percentage of the gross sales price and remit it to the IRS✓ Correct
CThe foreign seller must pay transfer taxes double the standard rate
DThe broker must file a special disclosure with AREC
Explanation
FIRPTA requires the buyer to withhold a percentage (typically 15%) of the gross sales price from a foreign seller and remit it to the IRS to ensure the foreign person pays U.S.
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Key Terms to Know
Transfer Tax
A tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
State-Specific Concepts
Transfer TaxAREC Regulation
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