USA

Real Estate Investment In U.S.: is it sill safe and profitable?

U.S. buying costs range from low to high.

How high are the rates for realtors and attorneys in the US? What is the expense of other property purchases?

Costs of Transaction:

Title Search and Insurance; the buyer pays : 0.5%-1%

Recording Fee; the buyer pays: 0.2%-0.5%

Legal Fee; the buyer pays: 0.5%-1%

Legal Fee; the seller pays: 0.5%-1%

Real Property Transfer Tax; the seller pays; 1%-1.425%

Real Estate Broker’s Fee; the seller pays: 6%

Price paid by buyer: 1.2%-2.5%

Price paid by seller: 7.5%-8.425%

ROUNDTRIP TRANSACTION COSTS:  8.7%-10.925%

How difficult is the process of buying property in the States?

There are slight restrictions on foreign ownership of real estate in America, but they are negligible for purchase-to-let investment purposes. At the federal level, there are only a few limitations on non-resident aliens (NRAs) who possess or trade in real property (the Agricultural Foreign Investment Registration Act, 1978 (FIDA); the International Investment Survey Act, 1976 (IISA); the Foreign Investment in Real Property Tax Act, 1980 (FIRPTA)). These restrictions are unimportant for practical purposes. In Oklahoma, non-US citizens are not permitted to purchase property, but they may purchase condominiums.

Basic methods vary from state to state, as well as from counties to towns. The following protocol is practiced in New York City.

  1. Make an offer orally through your agent, who will deliver it either to the agent of the seller or directly to the seller. The seller can combat your bid by beginning a negotiating process that, ideally, will lead to a price, terms, and closing date agreement.
  2. The seller ‘s solicitor finishes the drafting of the selling contract. He or she obtains and checks the following documents: document for ownership transfer, survey, title insurance policies, promissory notes or mortgages on the asset, occupancy licenses, tax bills, fuel and utilities bills, rentals, elevator approvals, pools, etc.
  3. Meanwhile, the solicitor (a real estate attorney is needed in all land dealings in New York City) discusses the financial status of the condominium.
  4. The purchaser’s solicitor checks and negotiates the deed, title check and title protection policies, as well as the documentation related to in the title agreement, such as census, occupancy permit, property tax report, heating, cooling and electricity bills.
  5. After your lawyer concludes that the financial condition of the condominium is satisfactory, that the building regulations are acceptable to you and that the contract of sale is also acceptable, he will allow you to sign the contract. Usually, you would be expected to make a deposit of 10% of the purchase price. The contract plus the deposit will then be forwarded for signature to the seller. This money must remain in the seller’s attorney’s escrow account until it is locked. It is necessary to remember that once both parties have signed and submitted the contract, the seller can also obtain and accept other offers.
  6.  You will then collect the requirements of the board and the application documents from your real estate representative. In the case of condominiums, the sale is subject to the Board of Managers’ Waiver of the Right of First Refusal, which approves the buyer, unless you buy directly from the owner. Your purchasing contract must stipulate that you will apply your proposal for acceptance to the Board immediately, following the issuance of a financing obligation, if any. You will comply with the demands of the condominium board and have the paperwork needed to approve the waiver. Typically, the required materials include: an application, a financial statement signed by a Certified Public Accountant, all required support for your financial statement, three years of tax returns, bank statements, personal and financial reference letters, professional reference letters, sales contract, bank documents (if necessary) indicating that your loan is in place, etc.
  7. The submission must be checked and, if all necessary documents are provided and in order, permission must usually be given. After which you can proceed with the closing ceremony.
  8. Closing practices are common and vary from region to region. In general, all appropriate parties are present, their identity is checked, records are completed, financial estimates and changes are reviewed and documents, money and details are exchanged. Closing typically takes place in the office of the seller’s solicitor, but sometimes in the presence of the lender’s counsel. Various costs are payable at the time of closing, which vary according to jurisdiction. Usually, the borrower owes costs for the processing of deeds and mortgage, utilities bills, escrow fees, bank attorney’s fees, taxes, special premiums, lending charges, enforcement fees, origination fees, changes and any penalties that might be levied by the state and municipal government.
  9. In order to shield the borrower or lender from third party claims to real estate, it is best to advise the agent to archive the related records through storing them in a public registry facility, typically a country facility.

Footnotes to Transaction Costs Table

Round trip transaction costs include all purchase and re-selling costs of property – lawyer fees, notary fees, registration fees , taxes, agent fees, etc.

Title Search and insurance:

Title insurance fees vary depending on the location of the property. It is common practice to obtain title insurance from one of the participating title insurance companies. Title insurance can only be acquired at the close of business after the transaction has been concluded between the purchaser and the seller and the price has been paid.

A title report, while not necessary, is an important requirement for obtaining title insurance. Title businesses do not give title protection without a title report detailing the past of the deed and specifically articulating the ties, covenants and other restrictions on property.

The actual cost of title insurance and search varies greatly based on the size and valuation of the house, the location and scope and the nature of the search and insurance. It is beneficial to shop around to look for the best value – as a general guide it should be about 0.5 percent of the value of the property.

Recording Fees:

Recording fees are charged by the Government for making an official record of the change of ownership of the property. It can be paid by either party, but is usually paid by the purchaser. Recording fees are usually set and are small.

Legal Fees:

Attorney fees can vary depending on the location and nature of the deal. Most attorneys charge a percentage of the selling price, from 0.5% to 1%, while some lawyers charge a fixed fee or an hourly rate. Each party pays for its own lawyer.

Real Property Transfer Tax (RPTT)

Transfer tax will vary depending on the location of the property. Five states do not levy export taxes (Mississippi, Missouri, New Mexico, North Dakota and Wyoming). The National Association of Realtors shall have a list of the level of real estate transfer tax levied by various states.

In New York City, the property transfer tax is levied on the sale or transfer of properties and the tax rate varies depending on the value of the property and the status of the property.

NYC REAL PROPERTY TRANSFER TAX – RESIDENTIAL PROPERTY

TAXABLE INCOME, US$ TAX RATE
Up to US$500,000 1%
Over US$500,000 1.425%

 

NYC REAL PROPERTY TRANSFER TAX – RESIDENTIAL PROPERTY

TAXABLE INCOME, US$ TAX RATE
Up to US$500,000 1%
Over US$500,000 1.425%

Real Estate Agent ‘s Fee:

Real estate agent or broker’s commissions are usually negotiable. Although the regular rate is 6 percent, certain brokers are able to drop their prices just to close a sale. Many agencies charge a higher fee, but they have other features such as title search. It’s normally paid by the seller.

Los Angeles

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New York

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