Under the TREC One to Four Family Residential Contract, Paragraph 20 addresses the federal tax requirements for foreign sellers. If the seller is a foreign person under FIRPTA (Foreign Investment in Real Property Tax Act), what must occur at closing?
Correct Answer
B) The buyer must withhold a percentage of the sales price for potential federal income taxes
Under FIRPTA, when a seller is a foreign person, the buyer is required to withhold a percentage of the sales price (typically 15% for properties over $1 million) and remit it to the IRS. This is addressed in Paragraph 20 of the TREC contract.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
More Promulgated Contract Forms Questions
Under the TREC contract, all of the following contract terms may be changed through a TREC Amendment EXCEPT:
A buyer purchases a property for $450,000. The contract includes a $750 option fee and $12,000 in earnest money. The buyer defaults on the contract after the option period expires. The seller terminates and seeks liquidated damages. If the earnest money serves as liquidated damages, what is the maximum the seller can retain from the buyer's deposits?
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Under the TREC contract, who typically pays for the mortgagee's (lender's) title insurance policy?
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- → License holder Kim is helping a buyer purchase a residential property that is currently a foreclosure being sold by a bank (REO property). The bank provides its own lengthy purchase agreement drafted by its corporate attorneys. Kim should:
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Previous Question
In the TREC One to Four Family Residential Contract, Paragraph 22 addresses the agreement of the parties. It states that the contract constitutes the entire agreement. A buyer claims the seller verbally promised to include a riding lawnmower in the sale, but it is not listed in the contract. Under the contract:
Next Question
Under the TREC One to Four Family Residential Contract, Paragraph 7E addresses lender-required repairs. If the buyer's lender requires certain repairs before funding the loan, who is responsible for making those repairs?