The USA has a population of over 300 million, with masses of strong ethnic groups spread across various parts of the nation.  Even just a small swing in housing demand can have a massive impact on the market, as can a sharp cooling of interest.  While the long term trend for US housing is still on an upward curve, there are risks for Expats looking to move to the US .

The country itself has the largest economy in the world, and in effect controls what happens in the worldwide economy thereby giving the US population massive power over their trading partners.  However, the country does depend on trade with South America and the Far East, and any slowdown in those regions can have a magnified effect on the economy.

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

The 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. Employ an expert in the sector and let them do the hard work for you. Tell the agent what you are after, what you can afford and any special requirements that you may have.  Under a popular contract, the Agent is obliged to find something to suit your requirements, and make you aware of any potential pitfalls, costs, etc. The agent receives a commission from the seller thereby it is in their best interest to find a home which appeals to you.

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 property in the case where a situation arises in which the title to a property is uncertain. This is when a person or company has an interest in the property that was not found or disclosed at the time of the sale completion. 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 one 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 finalized 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.

Finance: If you possess property in your own country and would like to borrow against this in an equity release plan, there are independent financial advisors who will help you raise the necessary finance.

If you intend to buy property using a mortgage, you may wish to consider doing so before you move to the USA in order to avoid the need to wait until you have developed a suitable credit history in the US, or to help you to establish credit in the US, think about opening an account with American Express, Diners Club, or MBNA, as the information and activity on these accounts will transfer to US credit files. You can buy a house in the US without credit history if you have a down payment of 30% (in some cases, only 20% is needed); this will also secure you a good interest rate. Of course, if you have the funds available, you may simply purchase a property outright after your arrival.

Expats immigrating to the US (particularly those from the UK) will be pleasantly surprised at how far their money will stretch in the US property market. Of course, house prices can vary drastically from one part of the country to another, with the most expensive properties overall located in places like New York City, New England, Florida, and California; however, in “middle America,” it is not unlikely to find a three-bedroom, two-bathroom house with a garage and a large yard (i.e., garden) for less than $200,000 (in some places, prices are significantly less than this).

Investing: The property market changes rather frequently in the USA. Sometimes this is caused by trends in migration within the country; at other times it is a simple and clear indicator of the overall economy.

Owning property can be a good investment. Housing and land are both very solid assets and can dramatically improve one's overall “asset portfolio.” However, it is advisable to pre-determine how much time and money will need to be invested in a property, in addition to purchasing costs and property taxes, prior to closing a deal on a house or apartment complex.

Buying to invest requires using more complex strategies to ensure that the property will in fact yield a profit. This includes factors ranging from the location (are property values improving in that location?) to the amount of labour a place needs to increase its value and how you are going to make that investment (will you live there and work on the building every weekend for three years to improve its value by $20,000, will you rent it out to someone who will increase it's value, or will you simply hire professionals to increase the value sooner so that you can charge higher rental fees, for example?). Any expats looking to move to America in the short term may be presented with a buyers market, and the potential for some great bargains.  UK Expats will also benefit from the strong pound against the dollar that has increased British spending power in the US.  The recent period of financial distress is now a thing of the past as the market is now growing though at a slower rate.

Tax issues: While tenants are not subject to paying property taxes, home owners are. Property taxes are also a defining factor in the quality of local school systems in America. Property tax rates vary from state to state.

Insurance: It is advisable to buy owner's, landlord’s or renter's insurance. The amount covered may depend in part on how much you have invested in the property itself and also the amount of valuables that you keep at your home. Make sure you are aware of any extreme weather patterns or tendencies towards flooding or other hazardous weather in the area where you have purchased or rented a home, as you will need to insure against damage from a probable risk (water damage in a flood zone, for example).

Map of the USA

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Disclaimer: This guide is for information only and should not be relied upon as definitive. Details have been obtained from various sources and although we have done everything possible to ensure that it is correct, we cannot accept responsibility for it or guarantee its accuracy. This is because processes and laws change frequently, and may also vary dependant upon personal circumstances. You are welcome to use the information provided, but should always obtain confirmation of specific details and get independent specialist and legal advice in the country that the information refers to.

05-02-2011