How to identify a foreign seller

If a seller is a foreigner, also does not live in NYC and not a US citizen, how to verify their identity without a US SSN and driver's license as required in a normal closing documents? Buying from a foreign seller will have some potential risks? Your answers is greatly appreciated!

Different countries have their own issuing identity documents, which are used in transactions, as are W-8s. You may also hit FIRPTA withholding. However, I'm a broker, not an attorney... your attorney can give you more guidance here.

ali r.
{upstairs realty}

The buyer gets title insurance. So the risk is really with the title insurance company. They will do full investigation along with your lawyer.

It is easy to hire a private investigator in almost any country, and the price tag is normally lower than those in the US

But when you buy from a foreigner, be sure to press your lawyer to add a 10% withholding requirement in the contract. Most buyers got an IRS tax bill of 10% of the contract amount few months later. Yes it sounds ridiculous, but this is how things normally go. You don't want to spend a lot of your time and energy to clean up the shit for the former owner.

Keep that 10% in an escrow account , and when IRS comes after you, just release this money to IRS and let the form owner to fight with IRS.

ali and Anton,

Thank you so much for your info!!! I never heard of FIRPTA before.
If the seller does not come to the closing, I assume a power of attorney will be hired in NYC. If anything goes wrong later, does the power of attorney have any liability?

what do you imagine going wrong? I understand the fear of the unknown, but what shape is it taking in your head? Do you think you're handing your money to a seller who does not have full title to the condo unit?

front_porch,
Yes, I am afraid many unknowns since I never bought any property from a foreign seller before. if the seller identity cannot be verified by a traditional American way and without SNN and copy of driver’s license included in the closing documents, how do I know whom I am paying for. If later on find deed/title or tax issue, whom I can look for?

This is why you buy title insurance.

Well, NewComer, it's not like sellers who are American citizens are uniformly warm and fuzzy either.

Your best protection is to finance your purchase, because the lending bank will put the deal through a certain level of scrutiny in order to protect its loan.

Then, as George notes, you buy title insurance -- not just lender's title insurance, which the bank will require you to buy, but also owner's title insurance, which protects the cash you put into the deal.

Title insurance is not particularly cheap but it's prudent to acquire it.

ali r.

The seller doesn't matter one bit. You're buying an asset that they have vacated. The title closer will send the funds where they go, and the lawyer will verify that taxes are paid. As long as you buy title insurance, you are protected against clouds on title. I really can't figure out why you have any concern here.

is title insurance really working? any one has real life examples?

If there's potential litigation, better to be involved with US buyers/sellers

What, are you asking for some sort of post closing warranties? Properties are usually bought as-is, where-is. Buyers hire lawyers to do diligence for them.

As for title insurance, here are some examples of what is covered. Foreign or domestic seller takes out a mortgage the day before selling the property and flees with the money. Mortgage is not recorded until the day of closing of the sale and hence encumbers the title when the buyer transacts, but the buyer doesn't know this. Title insurance pays to remove the mortgage from the property title.

Another: seller is divorced but spouse claims they were not properly notified of the divorce proceedings and succeeds in having the divorce undone. Hence the sale of the property is invalidated. This could happen with a domestic seller as much as a foreign seller.

Another: title closer doesn't pay the seller and runs off with the money. Seller sues buyer for non-payment. Title insurer pays the seller.

>Anton. Title insurance does work. Had a very messy situation a number of years ago with a property sold illegally. Title insurance covered it and paid off

>Anton. Title insurance does work. Had a very messy situation a number of years ago with a property sold illegally. Title insurance covered it and paid off

Thanks all for the reply, I recall an interest case from this forum few years ago. Two doctors bought a condo together, Doc A didn't attend the closing and issued a power of attorney to Doc B. Few years later they had some financial dispute, Doc B used the power of attorney again to transfer Doc A's ownership to himself. Doc A sued, but looks like the condo is still solely owned by Doc B now.

Thanks all for the reply!

front_porch: thanks for advise "to finance your purchase". Often thinking of mortgage due to lack of money. Now, I am learning "to finance the purchase" actually also give another layer of protection. Ok, will definitely get mortgage!
George: thanks for advise "buy title insurance". I heard of lender's title insurance but not owner's title insurance. From now on, will buy both.

I have been worrying a lot after knowing the seller does not live in the US, and plus I saw from ACRIS that the seller transferred the original deed (owned by some individuals) to a LLC a few years after purchase. This seems make things more complicated and unknown.

NewComer17, and one more thing, the foreigner may show you solid proof that he already filed with IRS about the withholding. Don't fall for that, they might have sent the material late, IRS may have received it late, or indeed no one is late but still IRS will go after you. Remember to be firm and mandate the foreign seller to put 10% into an escrow account on the contract.

Be careful very careful

Anton, thank you so much about the tax withholding! Is 10% the minimum or can ask more? Is this in NYC tax law?
Admin2009, 100% Agree with you: must be careful.