What foreigner need to know about buying real estate in the USA
For many Americans, the process of buying a house can be a daunting and confusing. If you are foreigner that looking to buy in US, the process can be even more complicated. With proper planning and little time to empower yourself, you can buy your first home in USA. 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.
Can foreigners buy real estate in US?
Anyone may buy and own property in the United States, regardless of citizenship. There are no laws or restrictions that prevent any individual from purchasing or owning property in the US. You do not need a green card, a particular type of visa, or even US citizenship to buy a property. However, before you can buy in the US, you are required to have an Individual Taxpayer Identification Number. This number is issued to foreigners who are not eligible to obtain a Social Security number.
How the property will be used?
Before you start searching for home, you need to determine what you intent to use the property for. By determining the primary use for your property and how long you plan to own it, will help guide your homebuying process.
- Will this be a vacation home?
- A home to stay in while doing business in the US?
- A home for your children while they attend college in the States?
- An investment?
- An eventual long-term residence?
Where are you planning to buy?
There are 50 states in US. Decided where you want to buy will determine where and how to look for properties. In the US, real estate listing information is shared by agents using multiple listing services and consumers can access that same information using real estate sites such as Zillow, Trulia, or Redfin. Make sure you properly research the area where want to buy property to get an idea of the environment you might be living in.
What are the rules?
Real estate transaction in US are local. Each state in US 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. Make sure you know what you’re getting yourself into before you start the home buying process.
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.
How are you paying?
Many foreign buyers pay with cash because it speeds up the process. If you’re looking to get financing, your options might be limited. It is still possible to obtain financing for a purchase by a foreign buyer. However, foreigners are more likely to pay higher interest rates and be required to make larger down payments, often 40% or more of the purchase price. If you do get a loan, you’ll have to establish a US bank account. Your lender might require you to have a specific amount on deposit and set loan limits.
Type of property you can buy
You can buy single-family homes, townhomes, multi-unit apartments or condos, duplexes, triplexes, quadraplexes. You can even buy business properties such as shopping malls. The only property probably you can not buy is housing cooperatives or co-ops. This is because in order to buy a co-op you must have income inside the USA and a lot of co-ops generally prohibit foreign ownership.
You will need to pay annual property tax
Homeowners in the U.S are subject to property taxes regardless of their nationality. In financed transactions, annual property taxes are usually included in monthly mortgage payments in escrow account. But buyers who purchase in cash must ensure that they pay any monthly or annual taxes. Property taxes vary from state to state.
How will a US 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.
The United States government also requires that foreign nationals pay US income taxes (state and federal) on any net income (rental revenues less expenses) received from rental property. Consult a tax attorney to get answers to tax-related questions.
Should I purchase US 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.
Selling a U.S based property as a foreigner
Eventually, you might decide to sell your US-based property. Before you purchase property in the US, it’s good to be aware of the rules and requirements should you decide to sell your property in future. When selling the property, the foreigner will always be subject to U.S. capital gains taxes. If applies, IRS also requires that buyers of property from foreign citizens withhold 15% of the sale price. If the buyer does not withhold this amount, they may be responsible for additional taxes. This is referred as FIRPTA – the Foreign Investment in Real Property Tax Act of 1980.
Working with local real estate agent
After you had decided where to buy property in US, it is time to look for a real estate agent. You should work with a realtor you can trust. Foreign buyers, in particular, should take the time to find qualified and experienced professionals to walk you through the real estate buying process. The process might be different from your home country.
If you are not fluent in English or prefer speaking in your native language, choose agents, attorneys, inspectors and bankers who are conversant in your native language. While it may be possible to get translated copies of standard real estate documents, it’s likely that you will have to sign the English versions when it comes time to close the deal.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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