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Tips for Canadians Buying Real Estate in Whatcom County (or in the US)

By
Managing Real Estate Broker with Keller Williams Western Realty Lic #23590

 

There are a few things Canadians should know when buying homes or other real estate in Whatcom  County or anywhere in the United States.  There are more things to know but below gives one a decent understanding of the key basic factors involved for Canadians to purchase, own and sell homes and other real property in the U.S.

First off, there are not any laws preventing a Canadian from buying and owning property in the United States. I'm frequently asked by Canadians if they can buy real estate in the U.S. The simple answer is "yes". All immigration laws must be followed but a Canadian can buy and own real estate in the U.S.

The most common obstacle on the buying end for a Canadian purchasing property in Bellingham  or anywhere in the U.S. is getting state side financing. For Bellingham or Whatcom County, Washington Federal (WA Fed for short) and SaviBank are the only two lenders in Bellingham I know of locally that will offer US financing to Canadian borrower. WA Fed's phone number is 360-671-1144. SaviBank is 360-685-0080. Call them for rates and down payment amounts which vary depending on the Canadian borrower's overall scene. Depending on how organized one is and whether or not all of their Canadian paperwork (taxes) is current and to hand, be prepared for a 1 week to 10 day pre-approval process. Do not expect a quicky one day pre-approval process. WA Fed only does the full meal deal (fully documented pre-approval process). Also expect the loan to require a larger down payment (anywhere from 20% to 50%+) and the interest rate to be higher than the advertised downpayment requirements and rates one hears being available to those with US residency status. WA Fed should be contacted to get the specifics on downpayment requirements and interest rates. As of late Nov 2014, there are some other banks beging to roll out programs for Canadians - Caliber Mortgage for one.

To get around the non-optimum financing situation state side, many of the Canadian buyers I work with often refi their Canadian home or other properties in Canada (if they have enough equity there) and pay cash for the real estate they are considering state side. This has the added benefit of increasing their negoiating position on their state side purchase. Nothing like a cash offer to get a seller's attention and consideration.

The other main point for Canadians buying real property in the U.S.  to be aware on the buying end of things (although not directly affecting the purchase, but a ramification) is that the Canadian Revenue Agency will require that you disclose any asset purchased outside of Canada that's worth more than $100K. This means that you will have to include form T-1135 each year with when you do your Canadian taxes. And, word is that the CRA is now enforcing this and fining those that do not comply. Here's few links concerning that particular topic.

 
 
 
So, that's about it on the purchase end for a Canadian purchasing a home in the U.S.
 
However, before buying anywhere stateside, one should be aware of the selling process when one wants to eventually sell their stateside property in the future. In my opinion, the selling side can have more significant issues than the buying end of things. 
 
 
When you go to sell, the US IRS can comes into play. That is FIRPTA. And FIRPTA- Foreign Investor Real Estate Property Tax Act - kicks in if you sell the home to anyone but someone with US residency and is planning to make the home their primary residence. If you sold the place to another Canadian or even a US citizen that is buying the home to use as a rental property or a second home, then the IRS will require the title/escrow company to withhold 10% of the purchase at closing (when you sell). And if you don't really owe 10% to the IRS for income tax, you will have to file a US tax return to get a refund on any money withheld for the IRS but not actually owed them. For example, you purchase for $230K and let's say you changed your mind and sold in a year from now and prices haven't changed much and you sell for $235K. With your closing costs on the purchase and closing cost on the sale you would actually loose a little money because "typical" real estate fees here are 5-6% (but are negotiable) and other misc fees come to around 2.5%. So, your total cost to sell is around 7.5% to 8.5%. Thus paying $230K and selling for $235K you would actually only get 91.5% to 92.5% of the $235K sale and actually loose a little bit of money and not "owe" the IRS anything. However, even though you "lost" money the IRS will withhold 10% at closing when you sell - if the buyer is anything but someone with US Residency that is buying the place to use as there primary residence. In the example shown above, you would get all of this 10% back since you didn't realize any profit - but you would have to file a US tax return to get it back. There's a little more to it, but I'm trying to keep it simple and easy to understand. Here is a link or two to info on FIRPTA.
 
 
 
So other than getting a US loan, the reporting to the Canadian Dept of Rev when you do your taxes up there ( by including the T-1135 form) and dealing with FIRPTA when the time comes to sell, I don't know of any other significant issues pertaining to Canadians buying real estate in the Bellingham Whatcom County area or anywhere in the US. Call or email me if you have any questions. This information has been provided as a guide. I am not a CPA or tax guy. Moss Adams at 206-676-1920 or Roy Lentz at 206-734-2172 can help you with any specific tax or FIRPTA questions. 
 
Of course I'm happy to help anyone from north of the border find just the right property in the Bellingham WA area. I provide real estate services to all of Whatcom and Skagit Counties.

 

Posted by

Dan & Laurie
Pittsenbarger Team
Managing Broker - Keller Williams Bellingham

360-739-5857  | dan@pittsenbargerteam.com

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Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Dan Pittsenbarger - This is really good information.  Way back in around 2003 I had a buyer from Canada buy property in Texas. She wasn't very straight forward with me and seemed to avoid discussions about her financing. Every lender I referred her to get that pre-approval letter turned her down. But she insisted, she had the money and could be approved. During the process, she took trips to Korea, Vietnam (where she originated), and Houston. Then she told me (with a confirmation letter) that a Canadian Bank gave her a bridge loan. She did buy a very expensive house and I did represent her. Her loan was approved and I stayed in touch for many years. At closing, she wanted my commission because my Lenders didn't approve the loan and she did it on her own. Well, I won that argument and we did stay friends. 

Several years later, she sold the house (for sale by owner) and told me she had to save money and that's what her Financial Adviser (from Houston) told her to do to sell as FSBO. I saw on FB she married her Financial guy from Houston. It was odd. I sure wish I knew all the information back then. I didn't know about FIRPTA back then but obviously, she was being well coached. 

Agents need to know about FIRPTA and the information you shared was excellent! I hope you get featured by the people behind the scenes here on ActiveRain.

Apr 29, 2019 07:04 AM
Dan & Laurie Pittsenbarger Team

Thanks Patricia Feager, MBA, CRS, GRI,MRP . As we are the first county on the Canadian border and our asking prices are about 1/2 for the same home as those in the Vancouver BC area we deal with Canadians all the time.

Apr 29, 2019 07:14 AM
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Great info for Canadians buying in the US.  We get a lot of them in Hawaii too, but it's not half price over here!

May 02, 2019 01:23 AM