USA Property Guide: Renting Or Buying A House In The USA

How to rent or buy a property in the States: a detailed manual for expats.

The USA property market is as diverse and dynamic as the country itself. Whether you’re after a chic loft apartment in New York or a stunning villa in California, there is no limit to what you can find in the States.

Wherever you want to find your dream home, whatever location in the States you have in mind, be it the city that never sleeps, or the sunny coast of Florida, or the bustle of Las Vegas, you’ll find something for every taste.

Buying a house in the States

The USA property market is very transparent and well-regulated. That makes buying a property in the USA a straightforward process. 

Can a foreigner buy property in the USA?

Anyone can buy and own property in the US, regardless of where you come from. There are no laws or rules restricting foreign ownership of US property. 

However, you need to get expert advice before buying a property in the USA. It is important to understand the real estate purchase process and your tax and visa status to ensure your stay in the country is stress free and pleasant.

What complicates the process is the fact that each state has its own set of laws and regulations when it comes to the property market, so it is advisable to invest in the services of a US qualified lawyer to make things easier.

A real estate lawyer will review the sales contract for you, check the title and other documents relating to your purchase, and advise on legal and tax issues concerning your property.

Can I live in the USA if I buy a house?

No, simply owning a property doesn’t give you residential status. It also doesn’t provide you with any advantage for obtaining legal residency or citizenship. 

Although you don’t actually need citizenship or a green card to buy a property, you will need an Individual Taxpayer Identification Number, a tax-processing number issued to you by the Internal Revenue Service.

How to find a property for sale?

All properties that are for sale get listed on a nationwide database – Multiple Listings System (MLS), which can be accessed by all real estate agents. Consumers can access the same information using real estate sites such as Zillow, for example.

In the USA, real estate agents need licenses to operate. That ensures that agents have enough knowledge to help customers with finding, evaluating and financing real estate.

Legalities when purchasing a US property

When you have found a property you wish to purchase, make sure that you are totally happy with its condition.

You might wish to carry out a home inspection – an examination of the condition of a home – which will help you to make informed decisions about your pending real estate purchase.

Inspections are carried out by trained and certified specialists, and the findings are delivered in an Inspection Report.

When you hire a home inspector, make sure they are independent and not connected to your real estate agent or seller.

If the report states any defects that you would like to be dealt with, bring the question into negotiations before putting an offer forward – your agent will advise you on the best way to deal with this kind of issue.

You might also want the property to be appraised by a professional to give you a detailed report of the home’s market value.

Based on the Inspection Report and Appraisal you can instruct your agent to make an offer to the seller.

Once the price, the terms and the closing date are agreed and put in the contract, and the seller signs it, it becomes a binding contract. At this point you will have to put down a deposit, which might be anywhere between 20 and 30 percent for non-residents.

Your lawyer will carry out a title search to ensure the property is free and clear of any charges and all building permits have been closed.

Closing procedures may also vary from state to state, but in general at the closing both parties are present, the buyer’s and the seller’s identity must be verified and relevant documents and money are exchanged.

Costs & fees

In the USA, the sales commission is paid by the seller, so buyers don’t pay anything to have an agent work on their behalf.

What a buyer pays can also vary depending on the state. Typically a buyer pays fees to record the deed and the mortgage, utility bills, escrow fees, bank attorney’s fee, taxes, special assessments, financing charges, inspection fees, origination fees, adjustments and other fees that may be imposed by the state and local government.

Overall, budget up to 2.5 percent for cash purchases and up to 7 percent if you are getting a US-based mortgage.

Getting a mortgage

It is possible for a foreign buyer to get a mortgage in the USA.

To qualify for a mortgage you must:

  • Hold an ID such as a passport or a driving licence
  • Be able to present proof of address (a suitable utility bill, bank statement etc., dated no older than 3 months from the date the application is submitted)
  • Provide proof of income: for retirees, it might be a pension payslip or the latest bank statement evidencing payment from the pension company, together with either a pension statement, or an annuity letter, or P60 with a covering letter from the pension/annuity provider
  • Prove any other sources of income relative to your mortgage application
  • Show the source of your deposit funds
  • Show good credit history
  • Show that you have sufficient money to close the deal: your deposit between 25 and 30 percent, closing costs (around 5 percent) and 6 to 12 months mortgage and tax reserves
  • Provide details of your US bank account

Renting a house in the States

Renting a property in a certain area is a great way to familiarise yourself with it and to find out whether it is a perfect match for you.

If yes, you can start looking to buy a home in the location that you already know works well for you. If not, you simply move out when the rental contract is over and go to another location – no harm done.

Renting in the USA is almost identical to renting in Britain: you search for the properties you like, go to viewings, and sign a rental contract.

Useful questions to ask your agent

Ask your agent whether the property you have found belongs to a community or neighbourhood with a Home Owners Association. If it does, it can come with a lot of inconvenient rules, covenants, restrictions, dues and fees.

For example, there may be certain requirements as to the state of your lawn or yard, whether you can or cannot leave your garage door up, whether you are allowed to bring out your bin on the eve of the collection, whether motorbikes are allowed at all.

Failure to comply will result in a fine, it will also affect your rental agreement.

Rental contract in the States

Most often, a generic State Rental Agreement will be used. It is available from the local branch of the National Association of Realtors (NAR) board, and your prospective landlord or your agent will definitely have a copy.

Unlike in the UK, in the States it is possible to rent short term on a monthly basis without entering into a long-term contract first.

Or, if you wish, you can go for 12 month – or even longer – leases.

Some rental agencies and companies may have their own specific rental agreements.

Just like in the UK, when renting in the States you will be required to provide references, which can be difficult if you haven’t long been in the country. In this case, your agent can accept references from civil service workers in the UK as long as these references can be followed up.

As a rule, you will have to pay a bond (a deposit, usually one-month rent) and one-month rent upfront.

You will also need to provide your bank details and your visa status.

Summary

Finding property in the USA has many advantages for Brits. The system shares many similarities, but has a few key differences that are worth noting.

Due to the country’s diversity, it’s definitely worth spending some time doing initial research, and, if your budget and time allows, touring some of the areas that appeal to you.

Regardless of where you pick, the US has plenty of potential for those wanting a dynamic next stage in their lives.

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