International Buyers/Sellers Information

Buyers from other countries who wish to purchase property in the United States should first establish a registration number with the State Department. If you do not qualify for a Social Security number, foreign buyers and sellers must have international tax identification number. This number is known as ‘TIN’ and is issued by the federal government. (irs.gov) Be sure to place it on all tax returns filed by non-resident aliens and on forms that show withholding from real estate proceeds.
Individuals are U.S. residents if they have a “green card”, which admits an individual in the U.S. as a permanent resident during the calendar year, or “substantial presence” in the country. This is established when an individual either physically resides in the U.S. for 183 days or more during the year or meets the formula for residency over a 3 year period.

In this country, international investors can get mortgages; you don’t have to be a citizen or have a green card. Obtaining financing from a U.S. bank can be more complex for buyers from other countries. Pre-qualifying for a loan usually requires a 20 percent down payment for people from other countries, although there are special programs for people with diplomatic status so they can obtain financing with just 5 percent down. To qualify for a loan with just 10 percent down, foreign nationals need a passport, employment verification, proof of immigration status, three credit references from the country of origin — preferably a mortgage or rental history for one reference — and a U.S. bank account with enough money to cover the down payment, closing costs, and two to four months of principal, interest, taxes and insurance. The money must have been in the bank for at least 60days.

For investor property keep in mind that if someone collects rents or other income for rental properties owned by international investors that are foreigners who are not engaged in U.S. business or trade, they are required to withhold 30% of the gross income (before expense deductions) for tax purposes before paying revenues out to the foreign owners. The withholding amount can be less IF the country where the international owner resides has an income tax treaty with the United States. For more information, go to www.irs.gov. to get a special ruling (via a CPA) with form W-7 I.T.I.N. to not withhold. It needs 45-60 days to go through the system.

Upon selling, 10 % of the contract price of a sale made by a NONRESIDENT foreign owner must be withheld for tax purposes under the provisions of the Foreign Investment in Real Property Tax Act. This amount must be paid to the IRS within 20 days of the sale. A seller may obtain a qualifying statement from the IRS that reduces or eliminates this withholding requirement. Properties for under $300,000 that will be used by the purchaser as a residence for a specified time period are also exempt. Sellers who’ve furnished a “nonforeign affidavit” certifying that they will pay the tax are likewise exempt from withholding.
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The above information is believed to be correct, but must be verified. Please let me know if you would like a list of legal, tax, and other professional experts in foreign investments.

Due to the complexity of foreign ownership in the U.S., it is advisable to seek help from a legal professional before deciding to invest in the U.S. real estate.

The following professionals, in addition to real estate agents, may be involved in a real estate transaction. Please note that a buyer or seller may not necessarily choose to employ all of the professionals listed below in a real estate transaction:

  • Lenders (banks, mortgage loan institutes) – A lender provides funds necessary to complete a transaction and may provide other assistance to a home buyer with finance related issues;
  • Attorney – An attorney may be involved in contract preparation, related document inspection, closing document reviewing, closing/settlement, etc.;
  • Appraisers – An appraiser is usually involved in evaluating the value of a property;
  • Inspectors – An inspector examines the property in an effort to identify hidden defects or problems that the buyer may not have noted or is incapable of identifying;
  • Notaries – Notaries notarize documents, that is, they witness and affirm the authenticity of signatures on the documents. Sometimes, this service is provided free as a courtesy by a client’s banking institution, or by the transaction closing agent
  • Title companies – Title companies provide title insurance to a real property, and may also provide closing or escrow services. Title fee varies from company to company;
  • Accountants – Accountants help buyers or seller recognize and solve tax and finance related issues;
  • Surveyors – A surveyor measures land and charts its boundaries, improvements, and relationship to the property surrounding it. A survey is often required by the lender to determine the exact property boundaries of the property and assure that the correct legal description of the property is given in the deed.

In some states, lawyers may be allowed to provide real estate services. Although lawyers, notaries or other professionals may not necessarily be required in real estate transactions, it is in a client’s best interest to get expert help from those professionals since real estate investment probably is the largest financial investment in a person’s lifetime.

For more detailed information on Tax and Inheritance implications for Foreigners please click here.

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