The short answer to whether a foreigner can buy a property in the US is “yes”. Whilst some countries restrict the sale of land and property to natives the US does not. Further to this the conditions associated with foreigners buying a property in the US are generally very similar or identical to a native buying property.
There are some private developments that may impose local regulations. This includes cooperatives, condominiums or other such associations.
Among the many rules imposed by such associations may be the control of who purchases the property under their umbrella association.
The first major consideration most buyers will encounter is lending and what options are available to them as a non-resident. Even if you are not a resident, you can take out a mortgage in the US but lenders will typically demand large deposits, of perhaps 40% or more, to offset the risk associated with selling to a non-resident buyer. Some other basic requirements might apply, such as having an existing account with deposits of about $100,000 or more in a private bank with operations in the U.S. Be aware there may be taxes associated. In New York, the mortgage tax is generally 2.8% of the loan. This means that if you obtain a $1 million mortgage, you are subject to $28,000 in taxes. Also be prepared to
pay an above average interest rate to reflect the perceived risk the bank associates with lending to a foreign buyer.
Working with a real-estate agent is not a requirement to buy a house in the U.S., but should you decide to work with one, you don’t need to worry about commission fees. The seller pays his or her listing agent a commission of usually between 5% and 6% of the sales price at time of closing, and the agent then shares this money with the buyer’s agent if there is one. There is no set rule mandating how the commission should be split between the two agents, and the fee isn’t always divided evenly. So, when you use your own agent, you do not pay them. Your agent will contact the listing agents and show you as many properties as you’d like to see.
LEGALS & IDENTITY
It can be difficult to negotiate the purchase of a property and then proceed to closing when you are not present. It will inevitably involve providing Power of Attorney to an agent in the U.S. who will then to be able to sign on your behalf. There will be a legal cost associated with this service that needs to be considered.
In an effort to combat money laundering your identity generally must be disclosed when buying a property in the U.S. through an offshore company. This rule generally applies to cash-only purchases but may be extended to all purchases.
One thing that is a certainty in any real estate transaction is taxes. Unfortunately, these can be more complicated in land transactions involving foreign nationals, given that the tax laws of more than one country may apply. Different nations have different tax treaties with the U.S., so before finalizing any deals it is important to consult with a local tax expert in your country and possibly in the U.S. as well. Sometimes these laws may require a certain tax payment in the U.S. and a separate payment in the home nation, and some may only require taxes to be paid in the U.S. Property taxes vary from state to state, and even within states,
from 2.076% in Bergen County, New Jersey to 0.251% in Hawaii County, Hawaii.
On a related note, foreign buyers who finance their purchases with a 40% to 50% down payment are usually able to avoid paying income taxes on any rental income derived from the property for the first 10 to 15 years. This results from the types of expenses the U.S. government allows taxpayers to deduct from their income when filing income taxes. Things like mortgage interest, common charges, property taxes, and depreciation are included in these calculations, often leading to “negative income” calculations, meaning no taxes will need to be paid. This will eventually change the longer the property is owned, as some of these deductions eventually begin to run out, but this can be a great means of avoiding taxes on investment properties for a number of years.
When selling the property, the foreigner will always be subject to U.S. capital gains taxes. As a result, the foreign seller will automatically have 10% of the gross purchase price of the property withheld by the U.S. Internal Revenue Service.
2 thoughts on “Can a foreigner buy a Property in the US and what are the considerations?”
i would like to find out why it is that a commdeminium is being
sold for 7,000 900 to 10,000 dollars why is it so cheap there must be a cach to it . but it is only 2 bedroom and a small bathroom what is the catch
Thank you for your message. You will need to contact the advertiser of that property directly by filling the form on the page of the property ad.