First and foremost, there are no restrictions or special conditions for international buyers.  They have the same rights and privileges as U.S. citizens when buying real estate anywhere in the U.S. (including Florida).

 

I.  Purchase Process

 

bigstock-manWhen buying Florida property, there are a number of stages you will need to navigate:

 

1.  First, your lawyer will describe the immigration law options and tax implications of buying Florida property.  It is at this stage you should also begin looking at how to finance your purchase of Florida property. It is always advisable to get financing in place before looking at any Florida home for sale so you know what you can bid.

 

2.  Once you have found a Florida home for sale then you must put down a small “good faith” deposit of around $1,000, and sign a preliminary contract to reserve it.  It is worth inserting a clause stipulating whether the good faith deposit will be refunded if the sale of Florida property does not go through.

 

3.  Entering into sale-purchase agreement.  After signing the preliminary contract you then move onto a full purchase contract for the Florida property you are buying. At this stage a full deposit of around 10% is paid to an escrow agent for the Florida home for sale. Again, a number of contingency clauses should be inserted which will give you a way out if some problems with the Florida property are discovered further down the line.  An example of such a clause would be the sale pending on a home inspection and termite report (vital when buying Florida properties).

 

4.  Getting title insurance agents.  Title insurance agents will check the title deeds, prepare relevant transfer documents and ensure there are no debts or ownership issues connected to the Florida property. They will also set a date for the completion of the sale of Florida villas or other properties and perform pretty much the same function as a notary would in Europe. A notary is only used in the sunshine state when a Florida home for sale is being bought with a US mortgage.

 

5.  A closing.  A closing is defined as the specific time when the Seller is ready to hand over the property (with free and clear title) and the Buyer has all the funds necessary to pay.  During a closing, the Buyer will pay for the unit, title work, and other closing company related charges above and beyond the purchase price that you will pay. Closing costs start at around $1,000 and can go into the tens of thousands on expensive properties. For most condos, you should expect prices will remain around $4,000 for a closing

 

At the closing of the transaction, when the property is transferred to the new owner, the new owner does not need to be in the U.S.  Instead, the new owner can provide his or her representative with Power of Attorney to close the deal on behalf of the new owner. This is quite common and convenient for the buyer who does not want to come back to the U.S. for the closing.

 

II.  Summary of Property Costs

 

sharing-vacationWhen you buy property anywhere in the world, there are unavoidable costs that you will incur, and your Florida home is no exception. There are legal expenses, registration charges, taxes and other fees relating to the purchase of Florida properties. You have to take these costs into account when buying Florida properties.

 

1.  Initial costs.  In most cases, a goodwill gesture deposit of a few thousand dollars will be sufficient to reserve a Florida villa or other property and fix the price. Thereafter you would enter into a full purchase contract to buy Florida properties and lodge a 10% deposit with an escrow agent. You will also need to pay for any costs incurred when searching for a Florida home, such as a buyers’ brokers’ service.

 

2.  Legal/title insurance fees.  It is not a prerequisite to employ a lawyer when buying a Florida home. However, with property being such an important investment it is vital to seek the services of lawyers fully-versed in the intricacies of the law regarding Florida properties.

 

When not using a lawyer a title insurance company must be used. These firms check the seller is the legal owner of Florida villas or other properties and insures it against anyone making a third party claim.  Surveyors, known as home inspectors, will be paid for by the buyer. Estate agents commission of 6% will be paid by the seller.

 

In total 2% of the purchase price of a Florida home should be added in legal/title insurance fees. If you are buying using a mortgage add 3% to the cost of Florida properties in administration fees.

 

3.  Taxes

 

Sales tax is levied at 6% in Florida but some counties may impose a surtax of 1.5% in addition when Florida properties are being sold. Owners of Florida villas must pay ongoing property tax, which is paid a year in arrears. Property tax will equate to around 1 to 3% of the value of your Florida home each year.

 

4.  Closing costs

 

There are other services you will need to contract when buying Florida properties such as termite inspection, documentary stamps and the transfer of property and deed. These closing costs will add around another 2% to the cost of your Florida home.  

 

III.  Common Pitfalls

 

housing-marketFlorida property and taxation laws are fairly complicated and, as a foreigner, you should always work with a lawyer.  In addition to guiding you through the process of buying a Florida home and giving you advice to help avoid any potential problems, retaining a lawyer is highly useful for taxation and immigration issues. 

 

One of the most common questions faced by foreign buyers is how to take title of the property being purchased. The obvious answer is “in my own name,” but there are many variables to consider in structuring your U.S. real estate acquisition.

 

If foreign buyers take title in their name, the good news is that when they decide to sell their property, the gain will be taxed at the long-term capital gains rate of 15 percent, assuming the property was held for more than a year.  When it comes to estate taxes, however, if the foreign buyer dies while owning U.S. real estate, the entire value in excess of $60,000 will be subject to a tax at rates as high as 45 percent.

 

The tax rules are different for U.S. tax residents, green card holders and American citizens.  The current standard exemption for U.S. citizens and resident aliens is $2 million. So if the value of their assets is less than $2 million at the time of death, they will not be subject to the U.S. estate tax.  Also, the U.S. citizen and green card holder can pass on all assets to their spouse’s estate tax-free.

 

Another pitfall: as long as foreign owners file their US income taxes to report the rental activity (income or loss) in a timely manner, they are entitled to make a special election called the “net election.”  This election allows them to report the rental income net of all property related expenses (interest, taxes, maintenance, depreciation, etc.).  If a non-U.S. person does not file their income taxes timely, however, they lose the opportunity to make the “net election” and will be subject to a federal income tax of 30 percent of the gross rent with no deduction for any business expenses.

 

In other words, if a foreign owner of U.S. rental real estate has not been filing his tax returns for any reason (for example, because the owner is losing money and does not see the need to file annual income tax returns), he or she will have big problems.  Even worse, when they sell their real estate, they will not be entitled to use any of those prior losses to reduce the gain on sale since they were not properly reported to the IRS.  This is a harsh law, but it is how the IRS enforces tax compliance.

 

To avoid these problems, we work with experienced tax lawyers and accountants, who specialize in structuring real estate transactions on the behalf of foreign owners.

 

IV.  Additional Issues for Foreign Buyers

 

Although there are no restrictions on foreigners buying a property in Florida or anywhere else in the US, there are limits to how long they can spend in the country each year.  The traditional Visa Waiver program in operation for most European nationals allows them to stay in the US for up to 90 days.  Those who wish to stay between 90 days and six months must hold a B2 visa. To be successful, applicants must prove they have sufficient funds to support themselves during their stay.

 

Florida's immigration laws are strictly enforced. Those seeking a Florida Green Card, which entitles them to live and work in the state, face close scrutiny by the Immigration and Naturalization Service, particularly if they wish to start a business.  For more information, please see information on immigration law.

 

V.  Questions and Answers

 

ar136240027056011Do I need to be present in the U.S. in order to purchase a property?

 

No, the entire process can be done from abroad with the assistance of a local Florida lawyer.  You would only need to go to any U.S. consulate to notarize a few documents.

 

How can I hold title to a property in Florida?

 

You can own real estate under your name, your family, or a group of several individuals.  You can also place the property under a corporation, partnership or trust.

 

Should I get a house or a condominium/apartment?

 

It depends on what your preferences are.  Houses usually provide you with more privacy and space, and are perfectly suited for a family environment or entertaining on the water.  Condos can have excellent views and are easier to maintain, perfect for globe-trotting owners.

 

Are prices negotiable?

 

Yes, all prices are always negotiable.  Many times you can get considerable reductions on some properties.  On others, including foreclosures and short sales, prices have been significantly reduced below market value.

 

Who pays for your real estate services?

 

All property sale commissions are paid for by the seller/owner of the property.  In other words, we will work for you, but get compensated by the seller’s real estate broker.

 

What other costs are involved in the purchase of a property?

 

Other than the purchase price, cash buyers should expect title/closing costs to range between 1% to 1.5% of the purchase price.

 

After I buy a Miami home, what are the annual costs associated with it?

 

As an owner, you are responsible for only three main expenses.  The first is the monthly condominium/homeowner association fee, which varies depending on your residence.  The second is the annual city/county tax, which is around 1.8% to 2% of the market value of the property.  Last, you are required to have property insurance.

 

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