Foreign investors and property owners looking to invest in real estate in the United States are faced with vast legal complexion, intricacies, and cultural nuances, which can be understandably daunting or overwhelming. Retaining the legal service of an experienced team of real estate attorneys is the best way to safeguard your investment and look after your interests. The attorneys at The Saade Law Firm, P.A. have vast experience in real estate law and possess a deep understanding of the ever-evolving American legal landscape, which will be invaluable to any property owner or investor looking to do business in the country.
This article will explore important things foreign born nationals must keep in mind when purchasing real estate in the United States and the intricacies of investing in American real estate as a foreign citizen.
What is a Real Estate Attorney?
Real estate attorneys are legal professionals that specialize in matters related to real estate property. They understand the intricacies and complexities of the law and are advocates and advisors for their clients during real estate transactions, proceedings, or disputes. Their main responsibility is to protect the client’s interests by making sure all legal aspects are in order.
Real Estate Investment Does Not Guarantee a Visa
As per United States Law, foreign nationals can buy real estate without any involvement of a government agency, as long as it abides by the law. The law does not preclude foreign born people from purchasing real estate. It is important to note, however, that purchasing real estate in the country does not provide foreign nationals with special privileges or rights when it comes to obtaining a legal status. In other words, buying real estate does not guarantee you legal immigration status. Foreign nationals need an Individual Taxpayer Identification Number (ITIN) which is available to nonresidents. To obtain a visa, the client must contact an immigration attorney to understand the requirements and process.
For visa and immigration related questions, the client should consult an attorney specializing in immigration law.
Selling Real Estate as a Foreign National
An individual who is not a citizen of the United States and intends to sell real estate in the country must adhere to something called FIRPTA legislation (which stands for Foreign Investment in Real Property Act). This legislation, which was passed in 1980, applies to non-U.S citizens and foreign entities alike. It allows the Federal Government to withhold income tax that is owned at the point in time when a property is transferred. The usual amount withheld ranges from 10-15% of the gross purchase price depending on the transaction. There are, however, some exemption withholdings, including but not limited to:
- The realization of the transaction amounts to zero (0)
- The personal residence bought is valued at $300,000 or less
- The transaction is categorized as a non-recognition transfer
Experienced real estate attorneys, such as the team at The Saade Law Firm, P.A. are prepared to guide you every step of the way and be by your side to safeguard your interests and ensure transactions go smoothly.
Buying Real Estate as a Foreign National
International citizens purchasing real estate in the United States must be careful to comply with all taxes and regulations. It is important investors keep in mind the guidelines provided by the Internal Revenue Service (IRS) for determining what constitutes a US resident for tax purposes. Foreign property buyers and investors can be affected by tax liability in their home country and said countries tax treaties with the United States. Buyers are responsible for fronting the costs associated with title searches, legal fees, and recording costs, which tend to fall in the 1-2% range of the property purchase price. It is important to note that if a non-US citizen is purchasing a property over $10,000 in an all-cash transaction, it must be reported to the Federal Government.
Foreign citizens can purchase property in their own names or through a legal entity such as a limited partnership, joint venture, corporation, trust, or limited liability company. The structure in which the real estate property is purchased can affect the taxes.
Lastly, if the buyer is not able to attend the closing either in person or virtually, they can execute a Power of Attorney giving their trusted lawyer authorization to represent them at transaction closing.
Establishing a Good Credit Score
Both citizens and foreigners are subjected to a credit score and risk examination by a lender to apply for a mortgage. Before applying for a mortgage, the foreign national must establish and earn a good credit score. One way to do this is by working with global banks, as these well established financial institutions have the expertise to verify credit established abroad and provide process guidelines. In Florida, for example, it is common for qualified foreign buyers with a 30-40% down payment to obtain property financing.
The attorneys at The Saade Law FIrm, P.A. have vast practical business experience and legal knowledge handling end-to-end complex real estate transactions. Contact us today to learn more.