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When it comes to buying a property in the US, one of the most important things to know about is, er, how you buy a property. Makes sense, I guess.
That’s why we’ve been in touch with a property expert who knows what it takes to buy a home in the US. Chaim Gleitmann answers your questions and generally gives you a bit of guidance on what you need to bear in mind.
A bit about the process
Once a property has been identified by the client, a contract for purchase will be formed with purchase price and terms and conditions, and presented by the Buyer’s Agent to the Seller Agent.
Usually at the offering, a down payment of between 5% and 10% of the purchase amount is given which is held by an escrow agent – a neutral third party – until the offer is accepted, or will be refunded if the offer is declined.
Once the offer has been submitted, it usually takes no more than 24 hours to come to a decision. When the offer has been accepted, the final closing and transfer of the property to the new owner will be after 30 to 45 days once all inspection has been satisfactory concluded and no problems detected.
Cash sales take some less time to finalise. Properties purchased with a loan will take longer. Usually, those buying from overseas can purchase properties with 40% – 45% as down payment. It all depends on your credit status, bank criteria and requirements.
Start searching online!
The United States real estate market is divided in multiple real estate associations nationwide with their own centralised listing system. For the whole United States, listings can be found at www.realtor.com.
Restrictions, taxes and other important stuff
There are no restrictions on foreign buyers purchasing and holding any kind of US properties, whether residential or commercial.
The purchaser should be aware that if they decide to sell the property at a further point, there is what’s called a withholding tax – a government requirement for the payer of an item of income to withhold or deduct tax from the payment – of 10% for properties costing more than $300,000.
Generally, a foreign person is not subject to U.S. capital gains tax on the sale of capital assets located in the US. The Foreign Investment in Real Property Tax Act (FIRPTA), however, created an exception to that rule for US-based real estate. Under FIRPTA, a foreign person’s gain on the sale of US real property is treated as income, and as such is subject to regular U.S. income tax rates.
As such, if the U.S. real property is held by a foreign individual, qualifies as a capital asset, and was held for at least one year, any gain will be subject to the lower capital gains tax rates. And, if the property is held by a foreign corporation, the corporation will be subject to regular income tax plus the branch-profits tax. It is recommended to engage an US CPA (Certified Public Accountant) to establish any tax related situation.
It is also recommended to hire a Certified International Property Specialist (CIPS) as a Realtor who can guide and educate with the purchase of properties in the United States. Realtors are usually paid by the selling side of the transaction after a successful transaction has been concluded. There is no cost to the buyer.
Chaim Gleitmann CIPS (Certified International Property Specialist) is a Realtor Consultant with Xena Vallone Realty, 3562 South Osprey Ave, Sarasota, Fl 34239.