Mastering FIRPTA and the New FAR/BAR Contract: A Guide for Real Estate Agents

Mastering FIRPTA and the New FAR/BAR Contract: A Guide for Real Estate Agents

On April 8, 2025, I had the pleasure of co-hosting a webinar with Attorney James Brown, founder of New Path Title, to dive into the latest changes affecting real estate agents in Florida. As the founder of RealTrade—an online marketplace and social media platform connecting over 3,000 agents across 500+ brokerages—I’m passionate about equipping agents with the knowledge to thrive in today’s market. This session focused on two critical topics: updates to the Florida FAR/BAR contract and a deep dive into FIRPTA (Foreign Investment in Real Property Tax Act). Whether you’re a seasoned agent or just starting out, these insights will sharpen your skills and help you avoid costly pitfalls.

Why This Matters Now

The real estate landscape is evolving fast. With foreign investment in U.S. properties at an all-time high—especially in Florida—understanding FIRPTA is no longer optional. Add in recent updates to the FAR/BAR contract, and agents have a golden opportunity to stand out by mastering these rules. As James and I discussed, the biggest threat to our industry isn’t the market—it’s the uninformed agent. Let’s change that together.

FIRPTA 101: What Agents Need to Know

FIRPTA, enacted in 1980, was designed to address foreign investment (think Japanese investors driving up U.S. property prices under Carter and Reagan). Today, it’s a critical piece of the puzzle for any transaction involving a foreign seller. Here’s the breakdown:

• It’s Not a Tax, It’s a Withholding: FIRPTA requires buyers to withhold 15% of the gross sale price (not profit) when a seller is a foreign person under IRS definitions. This money is sent to the IRS at closing, and the seller can file a tax return to reclaim it if no taxable gain exists. Mislabeling it as a “tax” is a common mistake—don’t make it.
• Buyer’s Liability, Not the Seller’s: Here’s the game-changer: FIRPTA is the buyer’s obligation. If it’s mishandled, the buyer—not the seller or title agent—faces IRS penalties, sometimes years after closing. We’ve seen cases where buyers owed $50,000 in penalties over a $10,000 late payment.
• Title Agents Aren’t the Fix: Many assume FIRPTA is a title issue. Wrong. Title agents facilitate, but they’re neutral. A sale can close without one, though investors skipping title services often miss FIRPTA rules and get hit with penalties.

The FAR/BAR Update: Clarity Meets Opportunity

The latest FAR/BAR contract revisions (as of April 2025) bring much-needed clarity to FIRPTA transactions. Key changes include:

• Line 242 (Disclosures): Sellers must inform buyers in writing if they’re a foreign person. This shifts the burden to sellers early, protecting buyers and agents.
• Line 552 (Withholding Rules): Buyers withhold 15% of the sale price unless the seller provides a withholding certificate (Form 8288-B) or signs an affidavit proving they’re not foreign. If no certificate is ready by closing, buyers can send funds to the IRS or escrow them (at the seller’s expense).
• Line 568 (Buyer’s Choice): Buyers decide where the withheld funds go—straight to the IRS or a third-party escrow. Spoiler: No savvy buyer picks escrow. Why risk a title agent mishandling funds when the IRS is a sure bet?

Your FIRPTA Cheat Sheet

James shared a practical cheat sheet during the webinar, and it’s a must-have for every agent:

For Seller’s Agents

1. Ask Early: At the listing appointment, ask: “Have you filed a U.S. tax return? Do you have a Social Security Number?” If “no,” refer them to a FIRPTA consultant (we’ve listed some below).
2. Disclose Upfront: Label it a “FIRPTA sale” in the MLS (public and broker remarks) to satisfy Line 242 and avoid surprises.
3. Do the Math: Calculate if the seller needs to bring cash to closing. For a $1M sale with a $900K mortgage and $60K in costs, only $40K remains—yet $150K (15%) must go to the IRS. That’s $110K out of pocket. Have this talk early.
4. Push for Form 8288-B: Encourage sellers to apply for a reduced withholding certificate ASAP. It’s a 90-day process (often longer), so start now.

For Buyer’s Agents

1. Notify in Writing: If it’s a FIRPTA sale, inform your buyer: “This is a FIRPTA transaction. Consult a tax expert.” Document it.
2. Follow Up: Confirm with the seller’s agent that a withholding certificate is in progress. Get the FIRPTA agent’s contact info and treat it like tracking a mortgage.
3. Guide the Election: Advise buyers to send funds to the IRS, not escrow. Third-party risks (e.g., misappropriated funds) aren’t worth it.

For Both Agents

• Tell the Title Agent: At contract submission, flag it as a FIRPTA sale and note the certificate status. Bonus points: Add the FIRPTA agent’s contact in Paragraph 20.

Common Myths Debunked

We heard from agents like Wendy during the webinar—veterans who admitted FIRPTA tripped them up. Here’s what not to believe:

• “Transfer it to an LLC and skip FIRPTA”: False. This doesn’t dodge FIRPTA and might raise the seller’s tax bracket.
• “FIRPTA is the seller’s problem”: Nope. It’s the buyer’s liability.
• “No profit, no FIRPTA”: Wrong. It’s 15% of the sale price, profit or loss irrelevant.
• “AI can handle this”: Not quite. James and I saw AI misstate FIRPTA rules (e.g., calling it the “Foreign Investment in Real Estate Tax Act”). Use it as a starting point, but verify everything.

Opportunities for Savvy Agents

FIRPTA isn’t just a hurdle—it’s a marketing edge. With foreign sellers increasingly common, position yourself as the expert:

• Pitch to Foreign Sellers: “Worried about FIRPTA? I’ll guide you to minimize withholding and avoid surprises. Contact me.”
• Educate Buyers: Highlight identical listings—one with FIRPTA, one without. Buyers will pick the simpler deal unless you manage their risk.
• Leverage Exceptions: For sales under $300K where the buyer lives in the property 50%+ of the time for two years, no withholding applies. For $300K-$1M, it’s just 10%. But beware affidavits—buyers balk if plans change.

Practical Takeaways

1. Know Your Contract: The FAR/BAR spells it out. Read Lines 242, 552, and 568. It’s your roadmap.
2. Avoid Third-Party Escrow: IRS delays (up to 18 months for Form 8288-B) make escrow risky. Half a million dollars sat in one of James’ deals—imagine if that vanished.
3. Prepare for Impact: A botched FIRPTA can cost buyers big (e.g., asset sales years later) and drag agents into lawsuits.

Resources to Bookmark

• New Path Title: Visit newpathtitle.com under “Realtor Resources” for the webinar recording and outline.
• Title Advance Link: for fast, no-cost reports that help realtors win listings and close faster. These reports include critical details on mortgages, liens, encumbrances, open permits, code violations, taxes, and utilities—everything needed to streamline your sale!
• RealTrade YouTube: Catch past sessions and links to tools like Title Advance and our closing cost calculator.
  

  
  
  Here are a few South Florida firms that take new FIRPTA clients:

• FIRPTA Consultants: Need help? James recommends Mata & Baker Tax Consultants, PA. They’ve got agents on standby.
• FIRPTA Refunds: For fast, reliable assistance in securing FIRPTA tax refunds for foreign sellers of U.S. real estate.
• FIRPTA Solutions: For expert assistance with foreign investment tax requirements in South Florida real estate transactions. Prices are good and they speak all languages. 
• Roberge Poskus International: For trusted legal and tax guidance on international real estate transactions and cross-border investments. 

Final Thoughts

As James put it, “Iron sharpens iron.” We’re lifeguards in this industry, spotting mistakes and boosting everyone’s game. Whether it’s navigating FIRPTA or nailing the FAR/BAR updates, knowledge is your leverage.

Join us on RealTrade—it’s free, connects you with leads, and links you to pros like James. Let’s keep learning, growing, and closing deals smarter.

Got questions? Text James at New Path Title’s 24/7 attorney support (561) 307-0885 or message me (Ryan Poole) on RealTrade. Here’s to your next big win!