When someone is a foreign investor (the short answer meaning that they aren't a US citizen) and they are selling property in the USA, they may be subject to FIRPTA. The bottom line is the federal government wants to make sure that they can still get taxes from that seller, which is next to impossible if they don't live in the US. This means that escrow may withhold up to 15% of the sales price of the home from the seller for FIRPTA. Not 15% of the seller's profits, but up to 15% of the sales price. Wait! Don't lose interest yet, hang on one second. This means that Ms. Seller, if you are making a $30,000 profit on that home and the government's percentage is $50,000, then to close that transaction, you're going to need to come up with an extra $20,000 to set aside with escrow. Wowza, now tell me that's going to be no big deal.
I can see you starting to get blurry eyed and not caring about this already, but wait! The responsibility of FIRPTA lies with the buyer. As a buyer, you want to know if the seller falls under FIRPTA so that escrow, the sellers agent and your agent can all do their jobs and make sure that you aren't on the hook for thousands with the federal government. If you're a buyer, YOU could be responsible for those taxes if the seller doesn't pay the feds!
What do you need to do? As a buyers or a seller, talk to your agent about FIRPTA at the beginning of a real estate transaction. This can all be a non-issue as long as the communication happens from the get go.
