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All you need to know about buying in the USA
How to purchase A Property in The United States.
The term “global marketplace” has never been more descriptive – particularly when it comes to real estate.
According to the National Association of Realtors, international buyers purchased more than $68.2 million in U.S. residential real estate from March 2012 to March 2013, across all 50 states. Property sales in the United States to foreign buyers amount to more than 6 percent of total U.S. home sales in value.
Whether you’re an international investor, a Canadian snowbird or a first-generation immigrant living in the United States, purchasing in an unfamiliar market can be daunting. While this guide will help you get started, it is no substitute for the expertise of experienced real estate agents, attorneys, mortgage brokers and accountants you will want to consult along the way.
First determine: HOW THE PROPERTY WILL BE USED?
Before you start your property search, it’s important to think ahead to how you’ll use the home once the deal is done.
Will this be a vacation home?
A home to stay in while doing business in the United States?
A home for your children while they attend college in the States?
An eventual long-term residence?
SIMPLY BUYING REAL ESTATE in the United States does not give foreign owners any rights or privileges regarding legal stay or status. If you’re interested in staying in the states longer than allowed by a standard visa, contact an immigration lawyer.
By determining the primary use for your property and how long you plan to own it, you’ll be able to provide information to your real estate agent that will help guide the search and sale.
2) GET STARTED by Searching. If you are looking at purchasing property in California feel free to conduct your search on my website: www.ruhirealestate.com . If you are looking at purchasing elsewhere in the United States- Please email me and I will connect you with my network of top realtors in the country.
The way U.S. real estate transactions are carried out may differ from your home country. EACH STATE IN THE UNITED STATES has its own set of rules regarding the purchase of real estate, including the type of purchase contract used, the method of closing the sale and even the duties and titles of the individuals involved.
Several important U.S. real estate practices worth noting:
Foreign buyers will also want to give consideration to issues such as currency exchange rates, international wire transfers, banking systems, multi-national taxation and accounting issues, and import/export restrictions regarding currency and household goods.
Taking the time to learn how to convert from U.S. dollars into your native currency will simplify your shopping experience. Review the latest currency exchange rates .
Foreign buyers, in particular, should take the time to find qualified and experienced professionals to walk you through the real estate purchasing process. The Ruhi Real Estate Group Prides itself with assisting both foreign buyers and sellers in acquiring and selling their properties.
IF YOU’RE NOT FLUENT IN ENGLISH, or prefer speaking in your native language, our team- The Ruhi Real Estate Group is made of up realtors fluent in Hindi, Urdu, Mandarin ,Arabic, Spanish and English. In addition we work to make your transaction as smooth as possible by referring you to our entrusted partners who consist of attorneys, inspectors and bankers . In the end, the expertise ofthese professionals should make the experience less stressful for you.
Qualified foreign buyers with a 30 to 40 percent down payment can often obtain financing for their U.S. real estate purchases. MANY BANKS REQUIRE FOREIGN BUYERS to have a specific amount ($100,000 or more) on deposit with the bank while others set loan limits of $1 million to $2 million. You may also be required to present a minimum of three months of bank statements.
The U.S. home loan market offers an array of safe, affordable mortgage products that are both conventional and non- conventional including Islamic financing .
Before applying for a U.S. mortgage, you must first establish credit and earn a good credit score. You can start building your credit score by opening U.S. bank and credit card accounts. You’ll also want to be sure to report all income on your tax returns. Lenders use this income information to determine how much money they’re willing to loan you to buy a home.
When the time comes to apply for a mortgage, consider major banks with global operations. These lenders will have the experience necessary to verify credit established in other countries and to guide you through the U.S. home-buying process.
Questions & Answers
Do I need to become a citizen to buy a home in the U.S.?
No, you won’t need your citizenship or a green card, but you will need an Individual Taxpayer Identification Number (ITIN). That’s a tax-processing number assigned to foreign nationals who are required to have a U.S. taxpayer identification number, but do not have one and are ineligible for Social Security numbers.
An ITIN can be issued by the Internal Revenue Service or by a Certified Professional Accountant approved by the IRS. You will have to fill out a Form W-7 (in English language) or a Form W-7(SP) (in Spanish language) in order to request your ITIN. On the W-7 form you will be required to give a valid reason for your application.
Depending on your nationality, you may also need a valid foreign passport, visa and two or more current photo identifications, such as a driver’s license.
What should I expect from my first meeting with you acting as my Real Estate Broker?
This is the perfect time for you to tell us exactly what you’re looking for in a property and your budget. It might also be a good idea to take the time to tell us how the home-buying process works in your native country and ask about any differences in the U.S. market.
Is there a type of property I can’t purchase in the United States?
Foreign buyers are eligible to buy single-family homes, condominiums, duplexes, triplexes, fourplexes and townhomes.
Housing cooperatives or co-ops often have rules prohibiting foreign ownership. That’s because co-ops generally require that a buyer’s source of income be from the United States and that most of the majority of the buyer’s assets be kept in the U.S.
Should I purchase U.S. property in my name?
Foreign investors can purchase property directly – in their own names – or through some sort of business entity, such as a domestic corporation, foreign corporation, limited partnership, joint venture, real estate investment trust or limited liability company.
How the property will be used should play into your decision. Additionally, the structure through which you purchase your property can have dramatic tax consequences. Your real estate attorney and accountant should be able to provide counsel concerning your options.
Can I pay for my property in cash?
Yes, all-cash purchases are permitted, but U.S. law mandates that cash transactions over $10,000 be reported to the federal government. The requirement for reporting involves everyone connected to the transaction (purchaser, real estate agents, attorneys and title companies). The government wants to know how you earned the money and that it was legally obtained.
Cash buyers can potentially save money on mortgage application fees, loan origination fees, appraisals and title insurance.
Are there specific states in which foreign buyers should look for properties?
International buyers are attracted to different parts of the United States for different reasons. Some want to be close to business interests or family, while many others are drawn to warmth.
According to Zillow In 2012, Florida had the largest number of international buyers at 23 percent, followed by California at 17 percent, Arizona and Texas both at 9 percent and New York at 3 percent. According to the National Association of Realtors, about half of 2012’s foreign buyers purchased homes in suburban areas and 25 percent opted for homes in more urban areas.
Do I have to travel to the U.S. for the closing?
While you may very well want to attend your real estate closing, it is not necessary. In the event that you cannot or choose not to attend your closing, you must execute a “Power of Attorney.” This is a written document authorizing another person to represent you and sign on your behalf.
Are there additional fees I will need to pay at closing?
Yes, the buyer typically is responsible for paying for the title search and insurance, legal fees and recording fees, amounting to an additional 1 percent to 2.25 percent of the total cost of the transaction. On a $300,000 home, that amounts to another $3,000 to $6,750.
How will a U.S. real estate purchase affect my taxes?
A foreign property owners’ tax liability in his home country will vary depending upon where the purchaser is from and whether that country has a tax treaty with the United States. Consult a tax attorney familiar with your home country’s treaty to get answers to tax-related questions.
The United States government requires that foreign nationals pay U.S. income taxes (state and federal) on any net income (rental revenues less expenses) received from rental property. If tax returns are not filed in a timely fashion, a tax of 30 percent of the gross rental income may be assessed. Even if you’re incurring losses in the early years of your investment and you don’t owe any taxes to the government, you still must file your tax returns in a timely manner or be subject to financial penalty.
What is FIRPTA?
FIRPTA refers to the Foreign Investment in Real Property Tax Act of 1980. This ruling authorizes the United States to withhold income tax when property is sold, exchanged, gifted, transferred or liquidated by a foreigner. The Internal Revenue Service takes 10 percent of the proceeds and the state government will also take a percentage
If you have further questions about purchasing Real Estate in the United States please feel free to call or email us at:
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Information last updated on 2017-07-21.