Selling a U.S. property to a foreign seller on installment terms triggers special FIRPTA rules — withholding on each payment, separate Form 8288 per payment, and continuing buyer liability long after closing.
Most FIRPTA discussions assume a conventional sale: foreign seller signs over the deed at closing, buyer wires cash, FIRPTA withholding happens on the closing day, everyone moves on. The mechanics are clean.
What happens when the foreign seller takes back a note instead? Or accepts a multi-year installment payment plan? Or agrees to seller financing because the buyer can't qualify for a conventional loan?
The answer is: FIRPTA gets unusual fast. Special rules apply to installment dispositions that most buyers, sellers, and even closing agents don't know exist. This post walks through those rules and how they affect deal structure.
When a foreign seller receives consideration for U.S. real property over time — installment payments, seller-financed mortgage payments, deferred payment structures — FIRPTA withholding generally applies to each payment as it is received, not just at the original closing.
For each payment, the buyer must:
Over a 5-year installment with quarterly payments, that's 20 separate Form 8288 filings — each with its own 20-day deadline, each with its own potential for late-filing penalties.
Most buyers think FIRPTA ends at closing. They're not wrong about most transactions — in a cash sale, the only FIRPTA filing happens around closing. But seller financing transforms the buyer from a one-time withholding agent into a continuing withholding agent for the life of the note.
If the seller carries back a $500,000 note paid at $5,000/month over 10 years, the buyer is responsible for:
Realistically? Most buyers stop doing this within the first six months. Penalties accrue silently. The IRS catches up eventually — usually when the seller files a 1040-NR claiming a refund and the per-payment 8288-As don't match the IRS's records.
The Form 8288-B Withholding Certificate provides a critical option: it can establish the appropriate withholding rate for the entire installment series upfront, rather than applying 15% to each payment.
For a foreign seller with low expected gain on the underlying sale, the 8288-B can authorize a much smaller withholding rate — sometimes single-digit percentage, sometimes zero — applicable to all installment payments rather than just the first.
This dramatically simplifies the buyer's continuing obligation:
The certificate has to be designed correctly upfront. We've seen 8288-Bs filed for installment sales without addressing the installment structure — the certificate then only covers the closing-day withholding, leaving the buyer exposed on all subsequent payments.
One more wrinkle: under IRC §4475 (effective January 1, 2026), the 1% excise on outbound transfers applies to each payment that's then remitted to the foreign seller's home country.
If the seller is repatriating each installment as it arrives, that's 1% off the top of every payment. Over a 10-year, $500,000 note, that's an additional $5,000 in excise tax across the life of the deal.
Smart structuring: the seller maintains a U.S. account, receives payments domestically, and bulks up before periodic transfers home — minimizing per-transaction excise costs.
If you're a foreign seller considering taking back a note: this is a structuring decision, not a closing decision. Tell us during the negotiation phase, before the contract is finalized. Several things change:
If you're a buyer being offered seller financing on a foreign-seller property: ask early about FIRPTA. Ideally before signing the contract. The continuing-withholding-agent obligation is real and most buyers don't know they're signing up for it.
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