From time to time I browse the Internet for questions from would be buyers on different Web sites. Far too often I see real estate professionals turn away a golden opportunity just because the buyer lives outside the U.S.
I know the thought of financing a buyer outside the U.S. Is to many, (Foreign) for many. The truth is these transactions take place every day. The best way of arranging financing is having the prospective buyer arrange financing in their own country. This is done commonly through International commercial banks with branches in their home country and in ours. Basically they arrange financing in their country, using collateral and funds in their country and using their own locally established credit in order to obtain the funds. (Note: If you have an investor from another country, their credit does not show up in our U.S. Big three bureaus unless they have done previous credit transactions here in the U.S. ) After they are approved, the bank can transfer the funds through the U.S. Bank branch for disbursement. Sometimes, letters of credit are involved, sometimes not.
When a buyer from out of the country inquires about a property here in the U.S, refer your client to the nearest international banking center in your area to arrange for local financing in their home country in conjunction with a local branch here in the U.S.
Here are a few other things you should inform your client as well:
As a foreign national investor you may acquire, transfer, or be involved in a real estate transaction without the permission or approval from any federal, state, or local governmental entity. You just need to comply with the following issues.
If you are coming here to the U.S. personally to buy property you will need to get a visitors visa, some being the following: B-1, B-2 Business visitor, E-1 Treaty trader, E2 Treaty investor, EB5 Million Dollar Investor, H1-B Temp Prof. Worker, Etc. , They should consult their consulate office for more info. to find out which one is right for them.
Federal Taxation: Non-immigrants or non-residents must pay taxes on the income that they make from their investments in the United States. You are not taxed on income made outside the United States unless you overstay your visit.
As an international investor (foreign national) you may take title to real estate in your own name, in the name of a domestic corporation, foreign corporation, LLC, , Joint venture, (REIT), or a foreign pension plan. Have them consult a tax attorney for more information on proper vesting and the best way for them to hold any investment holdings here in the U.S.
Reporting and Compliance: If they have income from any source in the United States, including real estate, they are required to file a federal income tax return for the year in which your income was received. Also, some states and cities collect income tax and require a return to be filed.
The federal government also requires all foreign buyers of agricultural land to report their purchase within 45 days of closing the transaction.
They will also need to obtain an Individual Taxpayer Identification Number (ITIN). A ITIN can be issued by the Internal Revenue Service (IRS) or by a Certified Professional Accountant (CPA) approved by the IRS. You will have to fill out a Form W-7 in order to request your ITIN. On the W-7 form They will be required to give a valid reason for their application. ITIN Guidance for Foreign Property Buyers and Sellers http://www.irs.gov/individuals/article/0,,id=120219,00.html
Financing and transaction requirements:
Buying a Property All Cash: U.S. law requires that all cash transactions over $10,000 be reported to the federal government. The requirement for reporting involves everyone connected to the transaction including real estate agents/brokers, lenders, title companies, etc., Basically, they need to be able to document the source of where the cash for the purchase is coming from.
If a client is looking to finance the transaction in whole or in part or to make a purchase of real property here in the U.S., It is a good idea to establish an account with an international bank such as (Bank of America) or another International commercial bank that has branches in their country as well as the U.S. The bank can easily transfer funds to the U.S. Branch account when it becomes necessary, and can help with verification of their credit and income. They can also apply for a home loan at the international bank in their home country and it may be easier to obtain a financing package in the city where they live. The bank can also issue a letter of credit for certain transactions using collateral from funds or property established in the other country. The international bank can also approve financing and fund the loan locally like a U.S. Bank does. Note: Depending on the country, their may be certain restrictions on certain transfer of funds depending on the law in the country of origin and in this country. The international banking center can advise your clients of what restrictions may apply.
It is important that your client lines up financing BEFORE placing any offers on property to make sure that the loan can be approved and funded before the contract period expires.
Almost all banks and many lenders will require that the money (funds) that are used for the down payment and closing costs be deposited in a United States bank branch for a specified length of time. This is known as "seasoning" If the money is not deposited in the lender's account they will ask for proof, in the form of bank statements, from the other bank where the money is located. Sometimes it takes a few weeks to get this verification of deposit. It is not unusual for a lender here in the U.S. to require that the funds be seasoned for 2 to 3 months.
Lastly, have them consult both a tax attorney in both country's and a immigration attorney depending on if they intend to have extended stays or want to move here permanently.
Here are some other links that provide valuable information for foreign nationals that want to invest in U.S. Property.
A Side note: My previous experience includes over 25 years in Mortgage Banking including executive positions in both Commercial Banking and as Western Regional Supervisor of REO Escrow Operations for Fannie Mae's Western Region.
Blaine Richards - Keller Williams, Hollywood Hills http://www.blainerichards.com 310-598-8634