Guide to Property in USA

Property in USA currently comes in as number three in British buyers top property destinations, after France and Spain. This can largely be put down to the fact that, in accordance with its immense size, the USA boasts an abundance of opportunities for investors in search of all kinds of attractions, from beaches to ski resorts, or from exciting cities or theme parks to golf paradises.

A modern nation famed for the sheer scale and modern quality of just about any aspect of living, the USA is a popular destination for those seeking a part of the American Dream. Air connections to the USA are numerous and well priced, making for a viable foreign destination in which to purchase a second home or indeed invest in the USA’s booming tourist market.

Despite an apparent slowdown in the US real estate market compared to previous years, property purchased in popular locations such as Disney’s Orlando or rich and glitzy Las Vegas today can often fetch very healthy returns of around 30% per annum. Mini emerging markets and otherwise hidden investment opportunities centered in and around these areas also produce some excellent returns. Many luxury holiday homes are now helping to boost the ever increasing demand for tourist accommodation to serve the USA’s overwhelming and ever growing visitor numbers, currently topping 4 million per annum.

It is easy for foreigners to purchase property in USA, while a tried and tested, transparent system is in place, making property an enticing option, particularly as current Sterling and Euro rates are allowing investors to stretch to purchasing properties that would otherwise be beyond their reach.

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As a solid political and economic arena, the USA continues to be a firm favourite with investors the world over, all looking to buy into an amazingly strong country with a wide array of attractions to tempt them back each year.

As the world’s largest economy, the USA offers giant-sized potential to clients looking for a solid economic climate in which to purchase their property. Despite economic losses during the Iraq and Afghanistan wars, and Republican losses in the mid-term elections, USA still has much to offer investors. A recent rise in interest rates has slowed down the market somewhat in certain locations, while many investors are regarding this state of affairs as an ideal opportunity in which to buy at reasonable prices. These purchasers are choosing carefully within the favourite, buzzing tourist locations where values are continuing to rise.

The American quality of life and wide variety in climate and lifestyle options continue to draw investors and holiday makers to buy property in the USA each year.

Can foreign nationals own property in the United States?

Foreigners are free to purchase real estate in the USA. There is an abundance of finance and mortgage facilities available to foreign investors in all areas of the States.

Why should I choose USA?

The sheer expanse and variety that the USA offers property purchasers means there is something to please every taste. With a current slowdown in the market, many cash buyers are taking advantage of bargain prices in hotspots such as Florida and Las Vegas, which retain their appeal and relative market buoyancy. Tourist locations are firm favourites among foreign buyers who enjoy a second home or cash in on strong buy-to-let yields from their investments in high demand resorts.

What is the economic and political situation?

The USA is the world’s largest economy. Despite economic losses during the Iraq and Afghanistan wars, and Republican losses in the mid-term elections, USA still offers investors strong potential   Barack Obama won a landslide Democrat victory as President of the USA on 4 November 2008.  Although he has a tall order ahead to rectify the state of the nation’s economy, politically, many citizens and investors in the USA now also hope for improvements.  Emphasis on political stability and world peace is high on the agenda, a concept that will bring with it refreshed confidence and investment potential for the USA.

The recent rise in interest rates and the subprime lending crisis have slowed down the market, while many investors see this as an ideal time in which to buy, while prices are at a standstill for now. They are favouring top-end luxury property or other options located in busy tourist locations where values will continue to rise. In today’s economic climate, the strength of the Sterling and Euro against the Dollar allows many foreign investors to purchase even more for their money.

How do we travel to the United States?

The USA is well served by giants such as British Airways and Virgin Atlantic airlines, while an Open Skies agreement is planned in order to open up travel options to Europeans seeking more competitively priced services from a wider variety of airlines in the near future.

Virgin Atlantic flies direct to Las Vegas, Orlando, New York, Boston, Washington, Detroit, Miami. Los Angeles and San Francisco

Continental, American Airlines and Delta Airlines fly direct to most cities in the USA.

What is the direct flying time from UK to USA?

7 – 11 hours

Is a visa required to enter USA?

Under the Visa Waiver Program, some foreigners are allowed to stay in the USA for 90 days without applying for a visa. Currently, 27 countries participate in the Visa Waiver Program, as shown below:

Visa Waiver Program - Participating Countries:

Andorra	Iceland	Norway
Australia	Ireland	Portugal
Austria	Italy	San Marino
Belgium	Japan	Singapore
Brunei	Liechtenstein	Slovenia
Denmark	Luxembourg	Spain
Finland	Monaco	Sweden
France	The Netherlands	Switzerland
Germany	New Zealand	United Kingdom

Buying a Property in the United States

If you're planning to buy a house or apartment in the USA, there are a few things to consider. Holiday apartments or condominiums for sale for example are often located in gated communities that can have quite restrictive clauses that determine what residents are permitted to do during their occupancy and what not.

Your reason for purchase

Houses in the US are purchased for a myriad of reasons: you are looking for a holiday, retirement or relocation home. This will in part determine what budget you will devote for a US house purchase. If you need a mortgage, the realtor or real estate agent you use will typically put you in touch with a lender, or you may arrange a mortgage with your own lender back home. US lenders will do a pre-approval, not a pre-qualification, and there is a difference to how that works in Europe.

Determining your budget

Once you have determined your overall US house purchase budget, and how much you can afford to devote to a down payment, mortgage pre-approval cost, ongoing home ownership expenses such as maintenance for example and insurance, utility bills and local taxes, the next step is to decide what type of lifestyle you'd like to enjoy in your new neighbourhood. Beach life preferred? California, Hawaii and Florida seem ideal – but these US states come with very different price tags in terms of real estate.

Skiing in winter, hiking in summer and plenty of lakes around for water sports? The State of New York has far more to offer to outdoor enthusiasts than Central Park in the Big Apple! Whichever realtor or buyer agent you appoint for buying a house in the USA, they will negotiate the US home purchase on your behalf in accordance with your instructions and wishes, once you've found the right neighbourhood and ideal US property for sale. As US states vary hugely in climate, legislation, demographics, language even, there's quite a bit of research required before choosing a location.

Property Buying Process in the United States

When buying property in the USA, you will need to be aware of many factors that will affect your purchase. This section gives you a general overview the USA buying process.

There are no restrictions to foreigners owning property anywhere in the USA, but it would be unwise to assume that, because it is an English speaking country the buying process is the same as in the UK. Taxes and requirements vary from state to state and it is essential to seek out the services of local professionals who understand the procedure.

Agreement of Sale

Once you have found the property of your dreams, you will make an offer and an agreement of sale will be drawn up. This commits both the seller and the buyer to the sale, but subject to certain conditions such as the buyer obtaining a mortgage and the seller ensuring that the title to the property is “clean”. The buyer should be aware that the commitment to certain dates is binding. It is important 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 comes up.

Costs

The costs involved will vary according to factors involved in the purchase agreement and the type of loan the purchaser has applied for. A good rule of thumb is to allow between 3 and 5% of the cost of the property. Many of the costs involved with the loan application will have been paid for in advance. Typically the costs required on closing are the down payment, fees involved in setting up the loan (application fee, credit report, etc.), inspection fees, mortgage insurance, title insurance and stamp duty.

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 is when a person or entity has an interest in the property that was not found or disclosed at the time of sale. For example a lender may have a lien on a property that was not discovered for some reason. The title insurance protects the purchaser from any expenses or loss that may occur as a result of this defect in the title.

Taxes

Taxes in the USA will vary according to where you live and whether you are considered resident or non-resident for tax purposes. Local taxes are levied to cover education and other services. USA income taxes and capital gains taxes are fairly low, but inheritance tax needs good planning. It is essential to employ a professional to guide you through the tax system.

Surveys

In the USA this is called an Inspection Report and is an essential to have before buying a property especially as the buyer buys a property in the condition it is in at the time of sale. There can be no complaints or compensation for defects once the purchase is closed between buyer and seller. Apart from looking at the structure of the property an inspection should also be carried out for termite infestation and radon. Do not expect the seller to make all the repairs you demand, make sure that this is included in the sales agreement before you sign.

Banking in the United States

The USA banking system, as with many services, differs from state to state. Each state has its own commercial and consumer guidelines. It is important for property buyers to understand the local system and have a cheque account in order to establish a credit rating and pay utility bills.

In recent years, mortgage companies have sprung up throughout the USA and, as they do not have the overheads of the banking institutions, they can sometimes offer more favourable terms, having taken a large share of the market from the more traditional banks.

The Patriot Act

September 11th 2001 led to a review of the banking laws throughout the USA. Today it has been made more difficult to open a bank account for non-US residents. However, with the right help, this is achievable and many banks are willing to open accounts for purchasers of property in the USA.

Required Documentation Needed to Open a USA Bank Account

Primary ID:

This is any government issued document with a photo for individuals. The address on the ID must match the address given by the client. If it doesn’t, further proof of address must be provided such as a phone installation bill, rental agreement or a receipt for establishing any utility service.

Examples of Primary ID:

• Driver's License
• Valid Passport
• State Identification Card
• Armed Forces Identification Card
• Alien Identification Card

In addition, non-residents are required to fulfill the following criteria:

• They must have a valid passport
• They must permanently reside outside the United States but may have a temporary transitional residence
• They must not be a United States citizen or have a USA social security number
• They must not have a green card

When opening a bank account non-residents will be required to sign various forms, which will be explained to them at the time of opening the account

Acceptable secondary ID is as follows:

• Employee Identification Card
• Student Identification Card
• Major Credit Card

Ten Top USA Banks

Most of these banks will accept non-resident accounts, particularly those such as Citibank and HSBC, which have a strong international presence

• Bank of America
• J.P. Morgan Chase & Co
• Wachovia Corp.
• Wells Fargo & Co
• Washington Mutual Inc.
• Citibank
• U.S. Bancorp, Inc
• SunTrust Banks
• HSBC Bank USA
• World Savings Bank

Mortgages/Finance

There are also differences in obtaining a mortgage to the way European lenders handle property loans. Styles, sizes and prices also vary hugely across the USA, where a house can cost as little as US $80,000 or several million dollars for the same size of property, just because it happens to be in New York City, Los Angeles or Washington D.C.

With a surplus inventory of homes available for sale, many cash buyers with a clear vision for long term growth for the future are wasting no time in taking advantage of greatly reduced prices, while enjoying strong buying power in relation to the dollar.

Procedure for getting a mortgage

Requirements vary from state to state and therefore the information we supply must be considered solely as a guideline in principle to mortgage applications in the USA. Terms such as ‘points’ need to be understood, as well as the implications of repayment and application costs.

Most agents and brokers agree that it is advantageous to consult a mortgage broker and pre-qualify before looking for your property. Pre-qualification will enhance your credibility in the eyes of agents and sellers as well as assisting in speeding up the purchase process.

Down Payments

The majority of USA mortgage companies require a down payment of 20% for non-USA residents with proof of employment or documentation to confirm proof of income for the self-employed. In general the higher the deposit, the easier the process and the fewer proof of income documents are needed. Proof of the source of income has become an additional requirement since September 11th.

Choosing a Mortgage

The right type of mortgage for you depends on various aspects

• Your existing financial circumstances
• Whether you expect any future changes in your finances
• The length of time you intend to keep the property
• How you feel about fluctuations in the mortgage repayments

A fixed rate mortgage over a period of say 15 to 20 years could save many thousands of dollars over the period of the loan, but repayments are higher. On the other hand an adjustable rate mortgage may start with lower monthly payments, but these will obviously change if interest rates go up.

Documentation Required

• The final purchase contract for the property (if applicable)
• Proof of income pay slips for the last year. These should be computer generated or originals to that identify the employer and employees name.
• If you are self-employed personal and business tax returns for the last two years.
• Account numbers for all bank accounts
• Information about all debts including credit card account numbers

Escrow Account

Mortgage lenders often set up escrow accounts to cover payments of costs such as property taxes, local taxes and property insurance premiums. They ensure these bills are paid in a timely fashion and help the homeowner to avoid the pitfalls of unpaid bills.