Real Estate Documentation & Compliance Flashcards

In a FIRPTA transaction with a foreign seller, what is the general withholding rate on the amount realized?

Answer: 15%

FIRPTA generally requires the buyer to withhold 15% of the amount realized when the seller is a foreign person.

Which FIRPTA exemption may apply when a buyer buys a home from a foreign seller?

Answer: The price is $300,000 or less and the buyer plans to use it as a residence

No withholding is required if the amount realized is $300,000 or less and the buyer intends to use the property as a residence.

Who usually files IRS Form 1099-S to report the gross proceeds of a real estate sale?

Answer: The settlement agent or closing attorney

The person responsible for closing, usually the settlement agent, must file Form 1099-S reporting the seller's gross proceeds.

A buyer gets an email that looks like it's from the title company with 'updated' wiring instructions. What should the TC advise?

Answer: Call the title company at a phone number already verified, not one in the email

Wire fraud is common, so instructions must be confirmed by calling an independently verified number.

A brokerage deposits a buyer's earnest money into its own operating account. What violation is this?

Answer: Commingling

Commingling is mixing client trust funds with the broker's own business or personal funds.

A broker uses escrowed earnest money to pay office rent. What is that called?

Answer: Conversion

Conversion is using client funds for the broker's own purposes, and it is a more serious violation than commingling.

Which federal law requires financial institutions, including many settlement providers, to protect consumers' nonpublic personal information?

Answer: Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act sets privacy and safeguarding rules for consumers' nonpublic personal financial information.