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INFORMATION FOR FOREIGN BUYERS


 

Do I need to become a citizen or resident alien to buy a home in the U.S.?

No, you won’t need US citizenship or a green card, but you will need an Individual Taxpayer Identification Number (ITIN). That’s a tax-processing number assigned to foreign nationals who are required to have a U.S. taxpayer identification number, but do not have one and are ineligible for Social Security numbers. An ITIN can be issued by the Internal Revenue Service or by a Certified Professional Accountant approved by the IRS. You will have to fill out a Form W-7 (in English) or a Form W-7(SP) (in Spanish) in order to request your ITIN. On the W-7 form you will be required to give a valid reason for your application. Depending on your nationality you may also need a valid foreign passport, visa and two or more current photo identifications, such as a driver’s license.


What should I expect from my first meeting with my real estate agent?

This is the perfect time to tell your agent exactly what you’re looking for in a property. Also take the time to tell your agent how the home-buying process works in your native country and ask about any differences in the U.S. market. The more you know, the less stressed you’ll be when you enter into the negotiation process.


Will I need to hire a real estate lawyer?

Although not mandated, you may want to seek the services of a real estate attorney to help with any legal issues or questions you may encounter along the way. A real estate lawyer can review the sales contract and addendums for you, check the title and other documents relating to your purchase, and advise on legal and tax issues concerning your property.


Should I purchase U.S. 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.

Information provided by Zillow ©


Can I pay for my property in cash?

Yes, all-cash purchases are permitted. But US law mandates that cash transactions over $10,000 be reported to the federal government. The requirement for reporting involves everyone connected to the transaction (purchaser, real estate agents, attorneys and title companies). The government wants to know how you earned the money and that it was legally obtained.

Do I have to travel to the U.S. for the closing?

While you may very well want to attend your real estate closing, it is not necessary. In the event that you cannot or choose not to attend your closing, the closing agent can send all paperwork by email or online document signature website for you to sign and return.


Are there additional fees I will need to pay at closing?

Yes, please see our closing costs overview for buyers and sellers.


How will a U.S. 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. Consult a tax attorney familiar with your home country’s treaty to get answers to tax-related questions.The United States government requires that foreign nationals pay U.S. income taxes (state and federal) on any net income (rental revenues less expenses) received from rental property. If tax returns are not filed in a timely fashion, a tax of 30 percent of the gross rental income may be assessed. Even if you’re incurring losses in the early years of your investment and you don’t owe any taxes to the government, you still must file your tax returns in a timely manner or be subject to financial penalty. Information provided by Zillow ©

A very interesting article regarding mitigating U.S. income tax for foreign investors can be found in the March/April 2017 issue of Commercial Investment Real Estate magazine.


What is FIRPTA?

FIRPTA refers to the Foreign Investment in Real Property Tax Act of 1980. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. Persons purchasing U.S. real property interests from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 15 percent of the amount realized on the disposition. There are excemptions from FIRPTA. Before listing your property for sale talk to your accountant and your REALTOR® if excemptions might apply to you.

For more information visit the IRS website.


Financing

Qualified foreign buyers can often obtain financing for their U.S. real estate purchases. Consider a bank with ties to your own country. A Spanish-owned U.S. bank will likely be comfortable financing a real estate purchase by a Spanish resident; same applies similarly to banks based in Brazil, Colombia, Canada or other inbound markets. Many banks require foreign buyers to have a specific amount on deposit with the bank while others set loan limits of $1 million to $2 million. You may also be required to present a minimum of three months of bank statements. Additionally the funds must be in the account for at least 3 months before obtaining financing. Talk to your REALTOR® about your financing options.

Foreign buyers should be prepared to provide the following documents when applying for a U.S. mortgage:
Passport
U.S. visa (depending on country or origin)
Proof of income, employment or business ownership
Bank statements
Reference letters from a foreign bank or lender
Two forms of identification
Credit reports

QUESTIONS?