- Listing Office
- Listing Agent
- Selling Office
- Buyer’s Agent (Selling Agent)
- Agent Representing Both Seller and Buyer
- Capitalization Rate (CAP Rate)
- U.S. FIRPTA
The United States is an attractive real estate market for foreign investment because our government protects individual property rights, and our political and economic environment is relatively stable. This is in contrast to property ownership in China, where real estate is leased to the individual by the government through 50-year leases. Although these leases are renewable and can be sold or passed down, they are ultimately still government property. In the fall of 2011, the Chinese government added restrictions on buying real estate in country, which has accelerated overseas investments.
The United States does not place any restriction on non-U.S. citizens buying and owning real estate in the U.S. However, some countries may place restrictions on their citizens in regards to buying real estate in the U.S. Be sure to check if your home country has any such restrictions.
The United States is experiencing many foreign nationals who wish to invest in U.S. real estate due to the favorable exchange rate between the U.S. dollar and other currencies, such as the Yuan, Yen, and Euro. Specifically, the value of the Yuan has appreciated steeply against the U.S. dollar, gaining over 20 percent between 2007 and 2012. Thus, there is additional buying power for U.S real estate investments.
Our Homes2USA REALTOR® team understands that China is the fastest growing source of foreign purchasers here. The U.S. Bureau of Economic Analysis reports that Chinese foreign direct investments in the U.S. have grown at a compound annual rate of 34 percent since 2008.
Buying real estate in the U.S.A. is very safe and secure, as all transactions are subject to U.S. contract law and are handled by neutral third party escrow companies, who oversee all aspects of the transaction between buyer and seller.
It is important to note that in the U.S. real estate is very transparent. A new listing for sale is required to be posted to the listing service within 24 hours so that active properties are available to all agents. In some other countries buyers have to go from agent to agent to find a property.
In the U.S. the sales commission is traditionally paid by the seller, then divided equally between both the buyer’s and seller’s brokers. Thus, buyers do not pay a commission to the buyer’s agent working on their behalf. It is advisable to work with an Exclusive Buyer’s Agent, who will protect the buyer’s interest in the transaction.
There are different types of property available for sale in the U.S. Examples include Cooperatives (Coops), Condominiums (Condos), Townhouses (sometimes referred to as Townhomes or Brownstones) and Single-Family Homes. Your Homes2USA REALTOR® can educate you in all these areas and answer any questions you have regarding their differences. The important thing to note is that one common Coop rule is the prohibition of foreign ownership.
We are your resource to guide you through the complete U.S. real estate transaction process. The first priority is to get to know you personally and clearly understand your real estate needs and desires, and your budget. Our team honors discretion and will continually work to develop your trust and protect our clients’ interests. Homes2USA’s business is built on complete honesty, integrity, and strong ethics. Our success only results from making you successful and insuring we have satisfied you 100%.
Here are some common terms to help you understand California Real Estate:
The brokerage firm which has listed the property for sale.
The real estate agent who has listed the property for sale.
The brokerage firm that represents the buyer
Buyer’s Agent (Selling Agent)
A selling agent can, with a Buyer’s consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has a fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Buyer. A Buyer’s agent also has the following affirmative obligations to both the Buyer and Seller:
- Diligent exercise of reasonable skill and care in performance of the agent’s duties.
- A duty of honest and fair dealing and good faith.
- A duty to disclose all facts known to the agent materially affecting the value or desirability of theProperty that are no known to, or within the diligent attention and observation of, the parties.
Agent Representing Both Seller and Buyer
A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer. In a dual agency situation, the agent has the following affirmative obligations to both the Seller and the Buyer:
- A fiduciary duty of utmost care, integrity, honesty, and loyalty in the dealings with either the Seller or the Buyer.
- Other duties to the Seller and the Buyer as stated above in their respective sections.
In representing both Seller and Buyer, the agent may not, without the express permission of the respective party, disclosure to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered.
Capitalization Rate (CAP Rate)
Capitalization rate is the rate of return on a real estate investment property based on the expected income the property will generate. Also known as “cap rate”, it is used to estimate the expected rate of return on an investment by dividing the income the property will generate (after fixed and variable costs), by the total value of the property.
The Homes2USA team of partners can assist you in calculating the capitalization rate on potential investments you are considering. They will also guide you in considering other factors such as the growth or decline of the potential income, the increase in value of the property, and other alternative investments available.
To insure tax collection from foreign taxpayers, the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) was enacted and is a United States Tax Law that imposes income tax on foreign persons disposing of United States real property interests. FIRPTA requires buyers of U.S. real property interests to withhold 10% of the sales price, unless seller signs an affidavit that they are a U.S. taxpayer. The seller may apply to the Internal Revenue Service (IRS) to reduce this 10% to the amount of tax estimated to be due.
United States tax law requires all persons, whether domestic or foreign nationals, pay income tax on dispositions of interests in U.S. real estate. Foreign persons are taxed only on certain items of income and are not taxed on most capital gains. You should always consult with a tax professional to guide you in this process.
Your Homes2USA REALTOR® and designated title officer can answer questions you may have regarding this form as part of your real estate purchase.