Date: January 17, 2018
posted by Jaleesa / Comments: No Comments / Tags: foreign buyers, international buyers
Can a person who is not a citizen of the USA, nor a legal resident buy property in America? Are there any other restrictions to buying a home as a foreigner?
Can a Foreigner Buy US or California Property?
The short answer is that you do not have to be a citizen of the United States to purchase real estate here in California. You also do not need to have a visa or be a legal resident. Foreigners can buy fee land and have title to both property and land.
Foreign citizens regularly buy vacation or investment homes in the US. Foreigners own investment properties ranging from single-family to multi-family apartment buildings to retail shopping centers.
Getting a Loan
Purchasing California property all-cash is the easiest way to buy. Perhaps the biggest challenge for foreigners is getting a loan or mortgage for the purchase of property here in the USA.
When a US resident buys property with a mortgage, the financial institution will look at the borrower’s US credit report when making a decision. A non-citizen, or someone without legal resident status, will not have a credit report, so the banks have to do a different type of risk analysis for the loan approval.
Foreign buyers of California homes may pay a higher interest rate, may be required to come up with a higher down-payment amount (anywhere between 20% and 50% depending on the financial institution) and may have a harder time finding a bank that will provide the loan. However, this does not mean you can’t get a loan. It may just take a bit more time and effort.
Tax Withholding under FIRPTA
A federal law known as FIRPTA requires many real estate buyers to withhold tax from the purchase price paid to foreign sellers. FIRPTA, short for the Foreign Investment in Real Property Tax Act of 1980, obligates buyers of land, homes, stock in real estate companies and other types of real property interests to determine, for tax withholding purposes, whether the seller is a tax resident of the United States or a foreign country.
The withholding requirement exists because foreign persons and foreign companies that sell U.S. real property interests often are subject to U.S. income tax. The Internal Revenue Service generally will treat any gain on such a transaction as U.S. taxable income irrespective of the transaction’s connection to a U.S. trade or business.
Buyers of U.S. real property interests must withhold 10 percent from the purchase price if the seller is a foreign person. Buyers are required to send this withheld amount, together with a completed Form 8288, to the Internal Revenue Service within 20 days of the transaction.
Get Good Local Representation
If you are a foreigner buying a home in the United States, you will want the assistance of a knowledgeable and trustworthy agent to help you make a smart decision.
Jaleesa Peluso is a Certified International Property Specialist, and has undergone special training to represent foreign buyers and sellers of California Real Estate. Jaleesa can furthermore put you in touch with immigration attorneys, certified public accountants and other service providers who can help you with your purchase in America.
About Jaleesa Peluso, Orange County Realtor & Certified International Property Specialist
Between the Orange County Canyons to the Coast, Jaleesa and her team successfully connect buyers and sellers & landlords and tenants. Thinking of leasing, buying or selling your home? Call us now at (949)395-0960!