Friday, October 30, 2009

Can Foreigners Buy Real Estate in America?

The simple answer is: Yes they can. There is no difference between a US citizen and a foreigner when buying property in California. But a foreigner will need a valid Visa and proof of residence for country of origin to get a loan and get into the US legally.

There are many types of Visas from work Visas to student Visas. A permanent Visa can take years to get but a foreigner looking to invest $500,000 to $1,000,000 can get on the fast track to obtaining a Visa. (Contact an expert at 877homes@gmail.com for more information)

The process of buying real estate in California is simple: 1) select a property 2) make an offer 3) negotiate and sign a contract 4) contract for and inspections and read and agree to all disclosures 5) finally pay for the property.

1) Finding and Selecting a Property
Though self-explanatory for the best results select a reputable real estate agent and provide them with your personal parameters such as price range and square footage. Since, most people like to be independent ask your agent for access to properties meeting your parameters listed on their websites and in the MLS (Multiple Listings Service). Agents will have access to all the contact information necessary to set up appointments for your viewing and inspection of selected properties. As your agent we feel we are best qualified to meet your needs, Contact an expert at 877homes@gmail.com it’s FREE)

2) Make an offer
To make an offer certain legal forms need to be filled out and submitted to the seller. One can try to do this themselves, or hire a lawyer, but in most cases the use and assistance of a real estate agent has been shown to produce the best and most timely results. In most cases the seller will counter the offer and negotiations could go back and forth between the buyer and seller several times before an agreement is reached.

3) Sign a contract
Like in most countries, real estate agents are certified to process real estate purchase contracts. When the purchase contract and all counter offers are signed this commits both the seller and the buyer to the sale. The contract will be subject to certain conditions such as the buyer obtaining a mortgage (if money is borrowed) and the seller ensuring that the title to the property is “clean” and all inspection issues resolved. The buyer should be aware that the commitment to certain dates is binding. It is important to adhere to dates and conditions set out in the agreement, otherwise the seller might take the opportunity to pull out of the sale, particularly if a better offer has been received.

Typically there are fees incurred at the time of purchase. These fees will vary according to factors dictated by the purchase agreement and the method of payment the buyer selects. A good rule is the fees will range between 3% and 5% of the purchase price of the property. Most of the fees are associated with the origination of the loan so if you are offering all cash then your fees will be notably less. Typically the closing fees are for setting up the loan (application fee, credit report, mortgage insurance, appraisal, etc.), physical inspection fee, title insurance, and escrow fee.

4) Inspections and Disclosures
Once the purchase offer has been accepted the buyer has typically 10 to 17 days (the number of days depends on what is in the contract) to complete all inspections and review all disclosures. If the buyer has no problem with the property after reviewing the inspection report and disclosures then all that is left is paying for the property. If on the other hand, some damages or defects are discovered the buyer can request the seller to repair them or reduce the price. The buyer can also back out of the deal even if the seller is willing to do the required repairs or reduce the price.

5) Paying for the Property
When the buyer is using a loan, foreign or US, to assist in buying the property the lender/bank wires the money to escrow. If the buyer is using all cash then they would do the same; wire the money to escrow. Once escrow has all the money, the title insurance, and Grant Deed and everything checks then the purchase is complete except for the final signing of forms at which time the buyer gets the Grant Deed and keys.

For foreigners if the purchase will be with all cash then the process is simple but if financing is needed, there will be some additional work. Banks will typically require 20% or more down and will charge about 1% more on the interest rate. You should compare loan opportunities in your country versus the US.

Cost of Homeownership
As an owner of a house or condo you will have some responsibilities and the main one is paying property tax. Property tax in California is about 1% to 1.25% of the purchase price and increases no more than 2% of the original amount per year. Property tax is paid twice a year, February 1st and November 1st.

If you purchase a condo or a house in a gated community there will be HOA fees (Home Owner Association). The amount of the HOA fees varies from a few hundred dollars to over a thousand dollars per month.

Another fee that is common in newly developed areas is the Mello Roos. The Mello Roos for all intent and purpose is a property tax. Basically the Mello Roos happens when a developer builds many homes in an area the city will require that a new school and/or fire station be built or other improvements made. Instead of adding this cost onto the homes the developer will sell bonds (typically 20 year bonds) and have the new homeowners pay the bonds off. To avoid the interest the homeowner can pay their share of the bonds off early.

What is Title Insurance?
Title insurance protects the buyer of real estate in the case where a situation arises in which the title to a property is clouded. This happens when a person or entity has an interest in the property that was not found or disclosed at the time of sale. (This is very common in countries like Mexico) For example, a lender may have a lien on a property that was not discovered for some reason. The title insurance protects the new owner from any expenses or loss that may occur as a result of this defect in the title.

If you still have questions contact us at 877homes@gmail.com