Seller’s Affidavit Of Non-Foreign Status And Qualified Substitute
Both the Federal Government and the State of California want to know if a seller of real property is a foreign national and, in the case of the State, if the seller will live in California. Reason: you guessed it, they want capital gains taxes if they are due following the sale of a principal residence and even investment property.
A form was created many years ago on which appear a number of questions of which a Seller must answer no more than two. The form is termed Seller’ Affidavit of Non-Foreign Status. Both State and Federal law require that it be signed by the Seller of a principal residence. One problem with the form is that it calls for the insertion of the Seller’s Social Security number. It is fair to say that such a form, passing as it does from Seller to agent to agent’s Managing Broker and occasionally from there to a lending or title institution, the Social Security number can be in danger of falling into the wrong hands. Since the laws require the inclusion of the Social Security number in the Affidavit, but the Affidavit is prospectively insecure, a second form was created: the Qualified Substitute form.
A Seller is wise to sign the Affidavit (required) and the Qualified Substitute form. A Qualified Substitute in general practice is an escrow holder. The escrow holder will, in the course of interviewing a Seller, obtain and retain the appropriate Social Security number.
As with so many circumstances in which a second document has been created to correct a shortcoming in the first, there has been confusion about whether the Qualified Substitute may be used on its own and the Affidavit ignored. The answer as been a resounding “NO”.
It is possible that a sophisticated escrow holder will, when securing the Social Security number from a Seller will also provide that Seller with the multiple-choice questions asked of the Affidavit, but such escrow holders are the exception, not the rule.
Since the laws requiring the Affidavit are directed at the Seller and the Seller only, ordinary prudence suggests that you should tell your agent that you wish to sign both documents, leaving the Social Security number off of the Affidavit.