Les Echos – Edition 06 December 2013
In order to buy a condo or a house in the United States, you need to hire a lawyer who will be the one responsible for much of the work that is done in France by the notary.
A 1,130 sqft (105 m²) condo on Fifth Avenue in New York ($3.1M), a 915 sqft (82 m²) condo in Miami Beach on West avenue in the Mirador building ($375k) or a 2,766 sqft (257 m²) house in Covington in the suburbs of Atlanta ($110k)? American real estate is plural and there are as many opportunities to invest as there are budgets. But before becoming an owner of a home sweet home as a pied à terre or/and renting place, you still have to define your needs and find a property. Which is not necessarily easy when you live abroad in Carcassonne, Quimper or Grenoble (France). It is indeed necessary to know where to invest geographically. With no a knowledge of the districts, it is therefore better to go on internet and find Real Estate agencies of which it is their job. “And you shouldn’t hesitate to give them the exclusive research” adds a Miami area specialist from Barnes. “The seller pays the commission, not the buyer. The price will be the same, so it is useless to go with several agents. In addition, all real estate agents have access to the same database”. It’s the MLS network, an inter-agency service.
Take your time before buying
If it is not necessary to go every mornings to Miami, New York or Las Vegas, “buying in the United States needs to get yourself aware” insists this agent, “and it’s not easy to be so when you are miles away. We are talking about a major investment here. It is necessary to be informed, this is why we regularly organize meetings in France and publish guides for buyers etc…”. On the other hand, it is strongly advised to go on site at least once to visit the property, feel the neighborhood and the quality of the environment before stepping in. “You have to take your time” insists Nicolas Tarnaud, Real Estate specialist at Neoma Business School. “Take a minimum of two weeks vacation to get there. And never buy a property remotely from a catalog or at a trade show, especially in Miami. Also beware of overly enticing advertisements showing sumptuous villas at unbeatable prices”.
“Location will be the rule of thumb” said Christophe Bourreau of Barnes New York and gave candidates another piece of advice: be reactive. “A good piece of property does not stay long on the market, especially if it is well priced. So you must be ready and have already planned the funding, wich is being able to show you have the funds available”.
The Real Estate Agent has an important role
Then once the seller accepts the offer, time for the lawyers to get down to business. In the United States, the notary “does not have as extensive function as his French counterpart” specifies Christophe Bourreau: “he just certifies documents and attests to oaths”. This does not mean that the legal aspect of buying a property is overlooked. Quite the contrary. The lawyers for each party enter the arena and draw up a contract stipulating the acquisition price, the closing date and the entry into the property. It also includes possible provision. Preparing the sales contract takes three to five days. Then the buyer signs the contract and send the down payment into an escrow account, hence the need to have a large part of the funds available. In general, the down payment is about 10% of the purchase price. “Be careful not to sign whatever papers” warns Nicolas Tarnaud. “The promise to sell does not exist like it is in France. The contract you sign with your Real Estate Agent will be the same at the time of closing. The Real Estate Agent who will fully play his role of intermediary between you and the seller. It is this Real Estate professional who will fulfill all contractual formalities between the two parties”. The closing, in other words the transfer of ownership takes place between three and six weeks then after. Which is a fairly short compared to a financed purchase in France. In New York, it takes a little longer because you will also need to consult the Board of the condominium where the condo is located.
This all has a cost. You have to pay the lawyers (from $2,000), registration fees, various taxes and also take into account any costs related to the loan (Appraisal of the property, handling fees, mortgage fees, etc…). According to the Barnes agency, “the total cost of the purchase will be in the range of 2 to 5% when paying in cash, and 5 to 7% for a purchase with a financing.”
Visa and Green Card
This is a common question asked to Real Estate Agents in the United States. And the answer is no! Buying a property does not give you the right to a Green Card, even if you have created a Company in the United States to house your Real Estate investments. Certainly, in order to get a business visa (E Visa), which is different from the tourist visa, you must justify of a business investment; the creation of a company or the takeover of a business. The creation of a LLC (Limited Liability Company, equivalent of a French SARL) is not enough, because Real Estate investment is considered as a passive investment by the IRS. We must therefore stick to the “Esta program”, which allows foreigners to obtain a travel authorization of up to 90 days. A service that is no longer free and available on the website https://esta.cbp.dhs.gov/esta/.
There is however an exception, through Real Estate investment. By investing at least a million dollars in Real Estate (or $500k in certain region), it is possible to receive a temporary two-year Green Card through the EB5 category, which will lead to become an American citizen after 5 years. Nevertheless it is cautious to take advices from a lawyer before undertaking this process, knowing that the number of Green Cards is limited and this program is mainly intended for productive investments that create at least 10 jobs in United States.
Source : lesechos.fr