Buying real estate in the United States: what is important to consider for foreign investors
Buying real estate in the United States is an affordable and easy procedure for buyers. This is possible thanks to a developed information system that allows you not only to easily and quickly buy, but also sell real estate in the country. Buyers can count on the help of realtors, lawyers, financial institutions and insurance firms to assist them in the acquisition and maintenance of residential and commercial properties.
Favorable conditions are provided not only for the local population, but also for foreign citizens. The latter have the opportunity to acquire and own real estate without living in America or even being a citizen. It is also not necessary to be physically present in the country to buy real estate. This allows many foreign investors to remotely buy houses and apartments, acquire shares and become co-owners of American companies.
Are there any restrictions for foreigners when buying real estate in the United States?
There are no strict requirements for foreign buyers when buying real estate. They can not only freely acquire square meters in the United States, but also own them at their discretion. You can find a more detailed answer to this and other related questions by reading this guide. It has been specially designed for foreign investors interested in purchasing real estate in the United States.
The guide provides detailed information on all the nuances of choosing and buying an American home, thus helping you to understand the whole process of buying and selling from the inside. Additionally, comprehensive answers are given to questions related to local rules, taxes, the work of real estate firms and other details that are be important for foreign investors to learn about.
Real estate categories
Before purchasing real estate in the United States, buyers need to understand the category each property belongs to. It is important to take into account that local housing differs significantly from apartments in Soviet and post-Soviet buildings.
There are 3 types of residential real estate that are the most popular in the United States:
- Private House. This is what Americans call a «Single family home». It is located most often in the suburbs. On the territory of these houses there is usually a swimming pool and a backyard where the owners have the opportunity to organize various games and family barbecues.
- Condominium. This is what apartments located in residential complexes are called in the United States. Because these apartment buildings contain swimming pools, gyms and other amenities, condominium owners are free to share them with the rest of the residents. The housing complexes are kept clean and tidy by the governing bodies, which charge additional fees for their services.
- Townhouse. A type of housing that combines the features of a country house and a city apartment. A buyer purchasing a townhouse will live in apartments located in a two- or three-storey cottage where each owner has their own separate entrance, garage and a small adjoining courtyard. This option is often preferred by those who wish to acquire their own home, but within the city limits.
Key stages of real estate acquisition
Buying real estate in the United States comes with a number of standard procedures:
- Selection of a realtor/broker. If you wish, you can buy an apartment or house in the United States without the participation of a professional, but this significantly increases the risks for the buyer. A realtor is just that specialist who will protect your interests at all stages of the sale and purchase transaction, help bring down the price and warn you about possible problems with your housing. You should only trust professionals in this field: those who are able to honestly, accessibly and comprehensively answer all of your questions.
- Registration of Pre-approval letter. To enlist the support of a realtor/broker, the buyer needs to prove their financial solvency. This can be done by providing a letter from the bank which confirms the fact that you will be issued a loan to buy a home. If you are planning to purchase real estate with your own savings, it is important to make sure that they are available in your personal account. Providing a bank statement on the availability of money in your account will help to prove your solvency.
- Choosing the right housing. Since realtors have an extensive database of residential and commercial properties, you can exponentially reduce the search time. The specialist you hire will also advise you on the nuances that are typical for this or that type of real estate.
- Search for a lawyer. Along with a realtor, you will need a professional lawyer to complete the deal. They will make sure that the entire process of acquiring housing is legally correct, and your future rights to it are supported by law. You can find a qualified lawyer yourself or entrust the selection to your realtor.
- Compilation of an offer. After a suitable housing option has been found, it is necessary to form an offer for its owner, that is, a commercial offer. In essence, this is a model agreement with an indication of the conditions on which you would like to conclude the deal. If you have several suitable options, you can send an offer to different property owners. If the seller agrees to your terms, you pay a small deposit. Then you will have 5 days to inspect the object in detail, discuss all the clauses of the agreement and make possible amendments to it with the participation of your lawyer. At this stage, you can terminate the preliminary agreement without losing the deposit. If you decide to exit the deal on the 6th day, the seller has the right not to return your deposit.
- Real estate evaluation (Appraisal). It is conducted by an independent expert. The procedure is important primarily for the banking institution. You need to take into account that if the completed appraisal of the object is lower than the price set by the seller, the bank may not give you the loan you need to buy the home.
- Checking real estate for legal purity. During this procedure, a lawyer hired by the buyer checks if the seller has mortgage arrears or other possible encumbrances. At the same time, the title company drafts out insurance.
- Receiving a response from the bank about issuing a loan (Loan commitment). A banking institution needs about 3-4 weeks to make a decision on the possibility of lending. During this period, it is important not to take additional loans.
- Registration of the transaction. Takes place in the office of the title company. You need to come here with all the necessary documents (the realtor will provide a list) and the amount needed for the purchase of housing. The transaction itself is carried out by lawyers. If there are no problems during its implementation, you officially become the owner of the purchased property. If any nuances arise, the transaction is postponed until said obstacles are removed.
- Transferring the money. The rest of the amount is transferred to the seller after the transaction is concluded. At the same stage, additional costs are paid.
Important! After the entire transaction amount is transferred to the account of the title company or the lawyer, the buyer receives the documents that certify their right of ownership of the property (Deed). In a number of states, these documents are subject to mandatory registration. It is carried out by its title company, which sends the already registered documents to the buyer. In time, the procedure takes 6 to 10 weeks.
What are the additional costs when buying a property?
When purchasing real estate in the United States, foreign investors are forced to pay expenses that, at times, exceed the cost of the housing itself. Below is a list of the costs associated with each property purchase transaction:
- Legal services. They are usually estimated at 1000-1500 dollars. Since lawyers have the right to certify documents, you can significantly save money if you avoid resorting to the services of a notary.
- Insurance. Its cost will depend on the type of insurance chosen. You can take advantage of title insurance (useful in situations where the home has a different owner), accident insurance, and insurance covering structures and constructions. A hired broker will help you choose the best option.
- Title company fee. This will cost you 200 dollars. It is important to use the services of a title company, since it will be responsible for the purity of the transaction.
- House tax (about 1.19%). Paid twice a year. The buyer pays the first tax immediately after the conclusion of the transaction.
- Registration and court fees. In some states, you need to register your property by paying a fee.
- Bank services. Banking institutions charge for the registration of a mortgage (about $1000) and for maintaining your mortgage account (about $400). You will also need to pay for the services of a mortgage broker ($800) for providing information about your solvency.
- Translator’s fee. You will need an interpreter’s help if you don’t speak English well enough. Specialists charge about $20 per page for a specialized translation.
Are there any risks when buying an American home remotely?
If you are planning to invest in US real estate remotely, then you need to consider the risks that may arise when choosing and buying housing. It is important to remember that the more expensive the object is, the higher the risks become.
Contacting licensed realtors will help you prevent these risks. They will provide qualified assistance so that you can safely and legally purchase real estate in the United States remotely. As for the risks of further management of your property remotely, they often boil down to the problems associated with renting it out. These troubles can also be avoided in a timely manner by choosing the right type of real estate for your investment.
These recommendations are addressed to buyers who are going to remotely purchase housing for cash, without applying for a loan. In the event that you plan to resort to a mortgage, you will need to come to the United States in person to open an account with one of the local banks.