What is important to know about Buying Real Estate in the US?
According to Forbes Business Journal, foreign investment in U.S residential properties reached a record high of $153 billion in 2017. A total of 284,455 U.S homes were purchased exclusively by foreigners for varying reasons: vacation homes, a home to stay in during business trips, a home provided for children for their university years, an eventual long term residence or just an investment decision.
Non-citizen buying house in America
Non-citizens, or non-resident Aliens (NRAs), wishing to invest in an American home must first understand exactly how to buy property in USA. It is important to note that buying real estate in the U.S does not provide the owners with the legal stay or rights of American citizens. A regular visa is usually the only way to enter U.S territory, for longer stays, immigration should be considered.
The U.S will be more accessible with a purchased real estate with regards to visa requirements. However, citizenship or greencards are not available through real estate purchase.
The Major rules for foreigners buying Real Estate in US
Understanding how to buy real estate in USA means doing a bit of market research. Investment opportunities change on an annual basis, meaning that location matters. Generally, aspects such as employment growth, home prices, average property prices and average rent can predict the best bets for the future.
Forbes Business Journal has listed the top 20 markets for property investment in 2019, the top 5 being: Orlando FL, Raleigh NC, Jacksonville FL, Charlotte NC, and Cleveland OH.
Another important rule in understanding how to buy real estate in USA is knowing when to seek professional assistance. Certified International Property Specialists and real estate agents have undergone training in home purchasing processes. They would be helpful especially in terms of understanding where to invest and whether it meets your specific needs.
Keep in mind that a good solution for securing a home in America is hiring a good U.S attorney specializing in real estate purchases. This is very helpful especially in terms of undergoing the registration of property process and/or transfer transactions if needed.
What fees and taxes should buyer pay?
Non-citizens purchasing a home in America are not eligible to obtain a social security number. However, before proceeding with any house payments, non-citizens must secure the Individual Taxpayer Identification Number with the Internal Revenue Service. The ITIN is a tax processing number issued by the U.S government to process tax returns and payments. The ITIN does not provide any social security benefits and/or other authorizations, it is simply a way to secure tax payments.
Property tax is paid by all homeowners, regardless of citizenship status. Taxes are imposed by officials of a governing state, and is generally a percentage of the fair market value of the purchased property. Property taxes are generally paid annually, or semi-annually. However, with a mortgage payment, the amount is often distributed as a monthly payment.
Other fees included:
- Recording fees: charged by the government for registering the purchased property, fees depend on the governing state. Recording fees are usually for the purpose of registering the deed.
- Legal fees: if an attorney or other authorized person is needed
- Property transfer tax or the federal Estate taxes: depends on the government’s tax exemptions for the year, according to the IRS, the estate tax exemption for 2019 is $11.4 million per person. >The following states do not impose property transfer tax:
- New Mexico
- North Dakota
- Real estate agent’s fees: dependant on the agent, generally this is negotiated during the deal on a percentage basis.
How to avoid the Estate taxes
First of all, what exactly are estate taxes? The United States have created the estate tax in addition to the official proving of a will in preparation for a person’s death. It is a way of dividing an individual’s assets post mortem. To avoid liquidating assets for payment, people prefer to avoid estate taxes all together to leave their valuables to family members and loved ones.
Legally, a widowed spouse is entitled to all assets without any estate tax payment or commission.
Reducing your estate allows for saving on estate tax payments. A popular method includes tax-free gifts of a specified amount, usually gifted to children and other family members.
- Remove assets before death
- Life insurance
By making the Irrevocable Life Insurance Trust the owner of your policies, then the value from your estate can be removed. Other life insurance solutions are available particularly for estate tax avoidance!
Alternative methods for estate tax avoidance also include creating charity funds, creating a trust fund or founding a limited liability company/ family limited partnership. However, these methods require more in depth analysis and, most definitely, an attorney.
Other costs that may be included
The price and cost is dependant on the service providers of the area. But keep in mind that this is vital for understanding how to buy property in the USA:
- Moving costs
- Inspection costs
- Appraisal fee
- Wire transfer fees
- Documentation fees
- Credit report fees
- Title insurance
Mortgages in United States
Knowing how to buy property in the USA includes knowledge of mortgages. Non-American citizens should prepare themselves for higher interest rates and higher down payments on the initial purchase price and mortgage amount.
Using brokers as agents, also known as the buyer’s agents, this is a useful way to get a good deal. Brokers are experienced in the real estate industry and generally good negotiators on behalf of the customer. Nowadays, buyers prefer to use brokers as a way to avoid spending too much time on house searches and negotiations with sellers or seller’s agents.
Useful Tips for buying home and mistakes to avoid
- Never buy a home without a visiting the site first [especially for foreigners]
- Do your market research, find the right place that suit your interests
- Keep an emergency fund saved just in case
- Get PRE-approved for a loan
- Save your down payment
- Get everything you need in writing, on the contract, saves future payments and commission
- Finally, don’t buy a house if you’re planning on moving soon.