Are you a Canadian Snowbird looking to buy a home in Orange County, CA? Here is what you need to know!
Foreign home buyers scooped up a record number of residential properties in the United States in the last year. The National Assn. of Realtors said foreigners bought close to 300,000 properties. Chinese nationals were the biggest buyers, but the largest increase came from a surge in buyers from Canada, where prices have skyrocketed in recent years, partially due to Chinese investment there.
Buying California Real Estate as a Canadian
As you probably know, Canadians can indeed buy full ownership property in California. In fact, investing in a second home here in the Orange County area is fairly simple for a Canadian citizen. Jaleesa Peluso is a Certified International Property Specialist, and our goal is to make the process simple and straightforward as possible. From discovering your property to negotiating the best price and terms possible, you’ll soon discover why a growing number of Canadians have come to trust working with Jaleesa Peluso and her team.
What do Canadians need to buy a California home?
Canadian homebuyers usually don’t need a U.S. Social Security number or Green Card, just a valid passport and an Individual Taxpayer Identification Number (ITIN). This is a tax-processing number assigned to foreign nationals who are required to have a U.S. taxpayer identification number, and are ineligible for Social Security numbers. Applying for a ITIN is fairly easy. Just click on the link above to lean more.
Do you need an attorney?
Attorneys are not usually a part of California real estate transactions. The only parties involved with the transaction are generally the real estate agents, lender, escrow and title company. Our preferred escrow and title companies have extensive experience dealing with Canadian buyers, so you can rest easy, knowing you are in great hands! Furthermore, California real estate contracts are drawn up on standard forms designed by the California Association of Realtors. These forms are filled out by your real estate agent who is intimately familiar with the documents and the general purchasing/selling process. Most buyers and sellers do not hire an attorney for additional review. However, if you feel more comfortable using an attorney in addition to your Realtor, you are free to do so of course!
How do Canadians take title to real estate in California?
Canadian buyers are allowed to take full title to Orange County real estate, and can do so in a variety of different ways. Cross-border trusts have become popular to help minimize taxes, especially for higher net worth buyers. Some buyers put their title in their personal names while others prefer to use some sort of business entity, such as a domestic corporation, foreign corporation, limited partnership, joint venture, real estate investment trust or limited liability company.
How the property will be used should play into your decision. Additionally, the structure through which you purchase your property can have dramatic tax consequences. If you are not sure how to take title, your attorney or your Certified Public Accountant should be able to provide counsel concerning your options. If you’d like further assistance, we can recommend local tax specialists and attorneys who are experienced in serving Canadian clients.
Do you need to work with a Realtor?
We highly recommend you do so! Realtors are local area specialists who adhere to a strict code of ethics and are experienced sales people. By choosing an agent to represent you, you will have someone working and negotiating on your behalf. If you try to work directly with the listing agent, you will not have this benefit. In California the home listing agent is allowed to represent both sides. In practice however, the listing agent’s fiduciary duty is to the seller, and not to the buyer. Keep in mind, you do NOT have to pay extra to have your own agent represent you. In the vast majority of Orange County area sales transactions, the home seller pays our Realtor service fee for both resale and new construction homes, condos and/or vacant lots.
We additionally recommend that as a Canadian Buyer you search for real estate with the help of a Realtor who has the ‘Certified International Property Specialist (CIPS)‘ designation. These Realtors have undergone additional training and have demonstrated sufficient international business experience to properly represent foreign buyers in California.
Jaleesa Peluso is one of only 400 CIPS agents in California. Are you looking to buy? Give us a call at (949)395-0960!
Can Canadians get a mortgage in California?
Mortgages are readily available here in Orange County for Canadian homebuyers. When financing, a Canadian buyer will usually just need to establish a U.S. bank account before submitting an application. The financed property must also be a second home or an investment property – not a primary residence.
Financing requirements and lending packages for foreigners differ from those for U.S. Residents. You will generally be required to put between 20% – 50% down, depending on the lender and financial institution you are using. Jaleesa Peluso can recommend a variety of lenders who are able to provide home financing for Canadian buyers. We generally recommend you transfer your down-payment and closing funds to this bank account before making an offer on a house.
Of course, you can always purchase property in Cash. Cash buyers can potentially save money on mortgage application fees, loan origination fees, appraisals and title insurance.
Will owning U.S. property affect my Canadian taxes?
A foreign property owners’ tax liability in his/her home country will vary depending upon your individual situation and on whether or not you are for example leasing out your property and generating income from it. We recommend you consult a tax attorney familiar with your home country’s treaty to get answers to tax-related questions. We can recommend a qualified Certified Public Accountant who is experienced in serving Canadian home buyers.
The United States government requires that foreign nationals pay U.S. income taxes (state and federal) on any net income (rental revenues less expenses) received from rental property. If tax returns are not filed in a timely fashion, a tax of 30 percent of the gross rental income may be assessed. Even if you’re incurring losses in the early years of your investment and you don’t owe any taxes to the government, you still must file your tax returns in a timely manner or be subject to financial penalty.
There exists a tax treaty between the USA and Canada. One of the aims of the United States-Canada Income Tax Treaty is to provide relief from taxation in both the United States and Canada for income earned by Canadians. U.S. citizens and Canadian residents are taxed on their world income. If not for the treaty, Canadians would pay the U.S. tax on their U.S. income to the Internal Revenue Service and pay again to the Canada Revenue Agency. Both U.S. citizens and Canadian residents report their foreign income no matter where they file a tax return, whether in Canada or in the United States.
Will buying U.S. property allow a Canadian to live in California?
Simply buying California real estate as a Canadian, does NOT give you the right to live here full time. Real estate does not give foreign owners any rights or privileges regarding legal stay or status. If you’re interested in staying in the states longer than allowed by a standard visa, contact an immigration lawyer. Feel free to call us to receive a referral to a local immigration attorney.
Are you a Canadian thinking of buying a home in Orange County, California? Give us a call at (949)395-0960, and we can expertly help you with your real estate investment.
About Jaleesa Peluso, Orange County Realtor® and Certified International Property Specialist
From the Orange County Canyons to the Coast, we can help you as a foreign buyer! Are you a Canadian or foreign buyer considering investing in Orange County, California Real Estate? Call Jaleesa and her team now at (949)395-0960!