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UK residents are not required to obtain a visa if travelling on business or pleasure, provided they have a return or onward ticket and reside in the USA for less than 90 days. Anyone planning to live in the USA permanently need to apply and obtain an Immigration Visa.
The USA is a huge country with many cities, states and laws so you will need to be aware of the many factors that will affect your purchase.
This guide will give you a general overview of the purchase process and is meant to provide you with an insight into the steps you will take, as well as answer some of the questions you may have. It is not meant to be a definitive guide to purchasing real estate in the USA or a specific state.
For this information, the developers and Agencies we work in the relevant state and mountain resort will be happy to assist you, from making the offer to closing the sale, rental agency recommendations, lawyers, mortgage contacts and much more.
There are in essence three classifications of people eligible for residence in the USA:
- Close relatives of US Citizens or other legal residents
- Those with skills or professions in demand
- Those lucky enough to be accepted on the diversity Immigrant Program ("Green Card Lottery") of which the UK is not part.
Types of Mountain Property
- Condominium - the European equivalent to the apartment, these can be anything from studios - 5 bedrooms with surface areas that can exceed even a family home.
- Townhouse - 2 or more semi detached or terraced properties, split over 3 floors, with a surface area smaller than a cabin. Generally lower priced than a Cabin (same resort).
- Cabin - detached property in own grounds, 2 - 3 storeys, with a smaller surface area than a Family Home. Generally lower in price than a Family Home (same resort).
- Custom Family Home - detached property in own grounds built from off plan, 2 -3 storeys, larger surface area than a Cabin with higher specification of interior and exterior.
- Spec Family Home - Family home built by developer to be sold once complete or while under construction.
- Lot - A parcel or plot of land that can be built upon
Where and what can you buy
There are very few restrictions on ownership of land and property by non US Citizens in the USA but regulations differ from state to state. In the states of Colorado, Vermont and Utah, there are no restrictions.
Renting your property
The USA is one of the most popular tourist destinations in the world. Rental income from tourism can be a key factor in deciding where to purchase a home in the USA
In some states there are restrictions on how many days owners are allowed to rent their properties, while in others it is not permissible. In the states of Colorado, Vermont and Utah, there are no restrictions.
When a purchaser decides to rent their property, it can be 'short-term' or long term. Short term is usually weekend(s) and/or a week at a time, especially holiday weeks. Long term would be for the entire season (such as ski season, summer or fall).
Generally rentals are based on how many 'beds'/ how many people can sleep at the house; any amenity that the house has...like woodstove, fireplace, hot tub, convenience to a resort, or snowmobile trail
For a season, the renters pay for the entire season 'up front' so the owner receives their rental cheque before the tenant moves in to the house. They also have to give a security deposit AND they pay for all of the utilities and maintenance of the property, if the owner requires it.
At the end of the season, and once the property has been inspected and if there are funds left, then the owner simply sends them a check. If there is money owed to the owner for utilities, that amount would then be deducted from their security deposit.
Size of Properties
In the USA surface area is measured in Square Feet (Sq Ft) instead of Metres Squared (m2). For the easiest way to get a rough estimate to switch from Sq Ft to m2, is to simply divide by 10.
Distressed and Repossessed Properties
Throughout the economic slowdown as well as prior and beyond, the US has had and will continue to have a wide selection of distressed and repossessed properties. Otherwise known as Foreclosures, these are properties where the owner can no longer afford to keep up the repayments and are in turn repossessed by the Bank or Lender.
The Agents and Realtors we work with are qualified in this area and would be happy to assist you if this is an area you are looking in.
The Buying Process
The property buying process in the USA is quick simple and cheap but does differ from that in the UK. There are also some differences between different states and even county to county so it is always worth discussing this with your lawyer.
Selecting the Real Estate Agent
Anyone making a purchase of any kind of real estate in the United States needs to engage a qualified and licensed Broker or an equally qualified real estate service with experience in residential, investment and vacation property in the USA. All of the Realtors and Brokers we work with are suitably qualified to assist you.
Unlike in the UK, most properties are available for all agents and realtor’s to sell. Thus there is no need to contact multiple agents as this will prove time consuming for you with duplicate properties being presented. The Realtors we work with have access to all of the available properties in the relevant area/resort and will be happy to assist you in your search.
You are not required by law to select a Realtor or Real Estate Agent to buy a property in the USA but it is recommended to have one representing you. For this, you might be asked to sign a Buyers Agency Agreement which is a contractual agreement with the agent and he/she will be representing your interests solely and not those of the seller.
Should you not sign the Buyers Agency Agreement then the Realtor only owes you "truth" and "material facts disclosures". Any personal information disclosed could be passed to the seller, lessening your negation position.
Buyers Agency Agreement
This document is an employment contract which can be terminated by either party at any time, sets out things such as timescales, budgets, requirements, locations and other expectations you may have in writing.
By signing this document, the Agent / Realtor owes you care, confidentiality, accountability, disclosure and loyalty. In contrast the Agent / Realtor will also expect trust, honesty and disclosure by yourself.
We recommend the Buyers Agency Agreement is completed and signed once you are in touch with the Agencies and Brokers we work with.
Trust your Realtor
You should always trust your Realtor and listen to their recommendations using their knowledge and experience to your advantage.
Make a list of your requirements and provide information on:
- price range,
- location (ski in and out/drive to mountain)
- number of bedrooms/bathrooms
- size of property
- proximity to resort/city centre
- type of property (Condo, townhouse etc).
- do you want to rent the property
Also ensure you provide details of the "must have" things, such as amazing views, garage etc.
All of these details allow our Realtors to pull together a good cross section of properties to show you.
Finding the Property
You can preselect what you would like to see before you planned trip. The Realtor will then make the relevant appointments for your visit and put together an agenda for you.
Once you decide on the property you like after viewing, the Realtor will obtain the "history of the property" (CMA Comparable Market Analysis). This helps to provide information on what offer you should make.
Purchase and Sale Contract
In the United States, Real Estate cannot be sold in the absence of a written contract. When Residential property is sold this usually takes the form of a standard contract. If however an investment or commercial property is being purchased a specific and individual contract is normally drawn up.
Once you have found the property you wish to purchase you will make an offer and a Purchase of Sale Contract will be drawn up that includes:
- signature of both buyer and seller,
- the address of the property
- the amount of the sale price
- an amount of an initial earnest money deposit,
- a second deposit,
- closing date,
- acceptance time of the offer
- includes very specific clauses such as the seller must maintain homeowner's insurance on the property until the day it closes; that the seller must leave the property in 'broom-swept' condition [unless other conditions are specified in the contract - if, for example, it is a foreclosure house, it is a mess, the bank has not yet brought in a company to clean it out and a purchaser agrees, for less offer money, to take the property 'as is'...
This legally binding document commits both Buyer and Seller to the sale unless certain clauses written into the contract arise and also include:
- The buyer not getting a mortgage
- The seller not having a clean "Title" to the property
The buyer must be aware that they must adhere to all dates and conditions laid out in the Contract otherwise it can allow the seller to withdraw, in particular if a better offer arises.
When the acceptable offer/contract is agreed between the buyer and seller, a small "goodwill" down payment (Earnest Money or Escrow) is normally paid into a:
- Trust account controlled by the Agent / Realtor
- Escrow Company
- Title Company
This is normally around 10% of the purchase price and will remain in the account until the Closing of the Sale. At the same time the Buyer will apply for Title Insurance (see later).
Frequently, when the Buyer is an out-of-state purchaser, and they do not plan to attend a closing, the purchaser signs a power of attorney document [usually to give their attorney the power to execute all necessary documents on their behalf]...that attorney or the purchaser's representative [such as their broker] will conduct a 'walk through' before the closing to make sure that everything that was agreed upon, was in fact, done.
When purchasing Real Estate in America the general practice and law in most states is that the purchaser accepts the property in the state it is in at the time of the contract of sale is finalised. The buyer purchases the property in the condition it is in and cannot complain or seek compensation about significant defects after the buyer and seller close the deal.
One exception to this rule is it is not permissible for the seller to wilfully and intentionally withhold information about significant defects and problems associated with the property.
For this purpose it is strongly recommended that an Inspection Report (survey) is carried out on the property and this is paid for by the Buyer. You can discuss the Buyers Inspection period with the Agent / Realtor acting on your behalf but typically this period tends to run for up to 14 days from the point the contract is accepted.
The Inspection should look at:
- Structural Defects
- Termite infestation (certificate may be provided by the seller)
- Lead Based Paint (if the property is pre 1978)
- Testing the water supply if from the property’s own well
Buyers cannot expect sellers to make all of the repairs demanded and will be negotiated between the Buyer and Seller. All agreed actions, should be documented in the sales agreement.
Closing the Sale
This is the process that transfers ownership of the property from the seller to the buyer and moves the deposit and balance of funds to the Seller.
The closing date is the date when all contract obligations and duties need to be completed and is usually 30 days from signing the contract, but this is not law. The closing date can be agreed by both parties on signing the contract to meet a suitable time for both should this be suitable.
At the time of closing, the Seller must ensure the Title of the Real Estate is clean and the Buyer have their finances ready.
This is the insurance that protects the Buyer of Real Estate where a situation arises in which the title of the property is clouded. A clouded title is one where a person or entity has an interest in the property that was not mentioned between the time of signing the contract and closing the sale.
Title Insurance protects the Buyer of property in America from any expense or loss that they may experience in the clouding of the Title to the property.
The costs for purchasing a property in the United States are:
- Title Search and Insurance (0.5 - 1% of purchase price)
- Recording Fee (up to 0.5% of the purchase price)*
- Attorney’s Fees (allow 0.5 - 1% of the purchase price)
- Transfer Tax varies by location (Winter Park this is 1%)
- The seller of the property usually pays the commission of the property sale and this is usually in the region of 6% but can vary. The commission is split between the Sellers and Buyers Agent. The purchaser does not pay, Alpine Property Investments takes a referral feel from the Buyers Agent.
- UK Lawyer fees
- Home Inspection Report (typically around $1000)
- Mortgage (application fee, credit report etc)
- Foreign Exchange transfer fees
*This is the equivalent to Land Registry, a government charge for registering the transferring of the property (varies by location).
As a general rule of thumb allow 3 - 5% of the purchase price to cover your costs (including mortgage costs).
Unless purchasing with cash, one important step anyone interested in buying property in America needs to do before viewing property, is to obtain a financial commitment from a recognised lender known as pre qualification. This enhances your credibility in the eyes of the Realtor and Seller.
For prequalification you will need a copy of your credit report which can be obtained online for a nominal fee. Some lenders will do this over the phone while others ask to meet you in person.
During the pre-qualification process you will need to provide details about your income, debts and assets. This will allow the lender to determine:
- Your down payment
- Interest Rate and loan options
- How much you can borrow
- The value of the property you can afford to purchase
- Monthly payments
It is always worth selecting a couple of lenders to speak with and the Realtors we work with in Colorado, Vermont and Utah will be happy to put you in touch with local contacts particularly as the procedure and requirements of getting a mortgage from local lenders varies from state to state.
While the effects of the subprime mortgage collapse and global economic problems have made lending more strict and difficult, LTV’s (Loan to Value) of up to 80% loans are still available from UK lenders as well as local lenders in the USA.
Taxes in the USA as in any country are complex and vary dependant on where you purchase and whether you are a resident or not.
It is essential for Buyers to consult a tax expert when purchasing their property and the Agents / Realtors we work with can assist you with this during your visit.
This is a local tax levied to cover education and other services and depends on the value of the property (likely to be 75% of market value). The Agencies/ Realtors we work with will be able to provide you with estimations of yearly taxes on the properties of interest.
Sales Tax is not imposed on the purchase of property in most states. However in 36 US states a Real Estate transfer Tax is charged between 1 - 5% on the assessed value of the property.
All rental income is subject to 30% US tax, paid locally. In some states double taxation occurs between the US and the UK. Tax on rentals can be very low as there are healthy allowances on things such as mortgage interest relief and cost of inspection flights. Your tax expert can assist you with this.
In most states when buying a property with a mortgage, a "State Documentary Fee" is charged on the amount of the mortgage. An "Intangible Tax" at a rate of 0.002% on the mortgage amount is also payable.
Federal and state taxes apply to deal with the transfer of a property either when alive or upon your death. Each state varies significantly and you should speak to a Tax advisor regarding this during your visit.
Capitals Gains Tax
Capital Gains tax does vary but for properties owned for more than 1 year the figure ranges between 8 - 15%
Please note these details have been prepared as a guide only. Each State can apply different rules and regulations pertaining to the purchase of property and it is not possible to cover every single circumstance in these notes.
We recommend you take further advice with the Lawyer handling your purchase, Accountant, Tax Specialist or Rental Agency on anything you wish clarified before signing any contract of sale as we cannot be held legally responsible.
For more information on our properties for sale in Vermont (Okemo, Ascutney, Killington and the Lakes), Colorado (Winter Park, Vail, Beaver Creek) and Utah (Park City and Deer Valley), please visit our Properties Search.
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