Can Non-Residents Own Property in the United States?
The short answer is: Yes, foreigners can own real estate in the United States. There are, however, certain caveats and aspects of property ownership that non-resident house hunters must consider before they acquire a piece of the U.S.
First of all, the business climate of the U.S. real estate economy has favored foreign buyers ever since the bursting of the housing market in 2008. There have been quite a few incentives for foreigners to purchase American properties, starting with marketing and low prices. From 2008 to 2012, distressed properties weighed heavily on the Real Estate Owned (REO) portfolios of many banks, which prompted major price reductions. Banks were eager to sell these properties even as they took losses, but they had a hard time finding buyers who qualified for mortgages.
Enter foreign home shoppers from China, Latin America and Russia. These potential buyers come from housing markets where cash sales and owner-financing are the norm and mortgages are expensive and very difficult to obtain. The U.S. housing market has always been very attractive to foreign buyers, and this time they could actually afford the post-bubble bargains.
<strong>Jurisdictional, Taxation and Mortgage Issues</strong>
In the U.S., foreign ownership of real estate is primarily determined by state law, and some jurisdictions are friendlier than others. For example, it is easier for a foreigner who has never lived in the U.S. to own a home in Florida than in Hawaii. In Ohio, foreigners who purchase a home that is valued at more than $100,000 will have to file special forms with the Secretary of State. New York is generally friendly with regard to foreign real estate buyers, but those brownstone co-ops in Manhattan may be difficult for non-residents to pursue.
When it comes to taxation, there is the Foreign Investment in Real Property Tax Act (FIRPTA) to consider. This federal law applies to properties in all states, and it essentially creates an income tax for non-citizens who profit from the sale of properties they hold title to in the U.S. In South Carolina, there is a restriction insofar as corporations controlled by non-residents who intend to purchase more than 500,000 acres of land.
Mortgage financing is the most difficult aspect of the real estate process for foreign buyers. Circa 2005, the field of international financing for acquisition of properties abroad was active and vibrant in several nations; by 2007, however, that practice had virtually ceased. These days, it may take 30 to 50 percent down payments and considerable reserves to get one of these scarce foreign mortages.