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Buying Property: Closing the Deal

While buying property in the USA is rather common, it also comes with a lot more red tape than renting. In addition, the language may make it even harder for expats to deal with the paperwork. We give you some pointers on how to navigate the process of purchasing your dream home.
Don't be intimidated by the paperwork when buying property in the USA.

Costs of Buying Property in the USA

When you calculate your budget and later when you negotiate the price of your new home, don’t forget that there are additional costs that go far beyond the actual purchase price of the property. Therefore, it makes sense to try to remain sensible when calculating your US budget.

Later, when you negotiate the purchase price you will be the one making the final decision, even if your realtor takes care of most of it. It is important that you keep your cool and treat buying property in the USA as what it is: a business transaction. Even if you are an emotional person, try to put those emotions on the backburner and do not let the number of competitors sway you from your original plan.

Purchase Fees

When you are finalizing the purchase, there are various fees you can expect, including attorney’s fees, transfer agent fees, mortgage tax, title charges, and the down payment on the property. Let’s take a closer look at all of these costs. When the purchase comes to a close and you are about to sign the papers, you will need to get an attorney to make sure that everything is in order. Depending on who you hire, the rate might be on the higher end. Transfer agent fees usually only apply to co-ops and cover the review of the recognition agreement.

In some states, you will also be required to pay mortgage tax if the purchase price of your new home is below one million dollars. Make sure to ask your attorney about these additional fees before purchasing property in the USA. On top of this, there are the title charges which cover the title report, as ordered by the lawyer. The title company that way assures that you, as the buyer, have a good, marketable title to that home. All in all, you can expect between 3.5% and 5% of the purchase price in closing costs.

Which Documents Do I Need?

As is always the case with business transactions, the purchase of a new home involves a lot of paperwork. Documents detailing home inspections, pest inspections, and seller disclosures (including written warranties and guarantees) are just a part of the pile. And to top it all off, the process of buying property in the United States might vary considerably from state to state and sometimes even from county to county. This is why it is important that you work closely with your lawyer.

In general, however, the following documents are necessary to finalize the purchase:

  • A bank note that confirms that you have a mortgage that you will pay back throughout the upcoming years. It proves that you have borrowed the money to finance your purchase.
  • Proof that you have paid your earnest money deposit (about 1% of the purchase price) and made the down payment
  • Evidence of a homeowner insurance policy
  • A HUD-1 Settlement Statement which details all the official charges of the purchase and is important for filing your personal taxes later on.
  • The official deed which transfers the ownership of the property from the seller to you. It contains the name of the seller who transferred the title to you and the legal description of the property.

A title company will then register the deed with the local land registry. You will get the keys to your new home and the chance to finally move in. If you want to purchase a house or apartment before your move to the United States and you cannot be present at the closing, you can choose a representative (e.g. your attorney) to close the deal on your behalf.

Real Estate Taxes

On the previous page, we have already mentioned that you need an Individual Taxpayer Identification Number (ITIN) to purchase a home (unless you qualify for a Social Security Number). You will need to file for income tax once you have applied for your ITIN.

But as a new home owner, you are also required to pay property or real estate taxes from now on. They depend on the value of your property as assigned by the local government and on the state that you live in. In Florida, for instance the real estate tax rate amounts to about 0.2%, while in New York this rate is at 0.1%.

Different states may offer different tax breaks in relation to real estate purchase and tax treaties between your home country and the USA might have an effect as well. You should consult a professional tax advisor or accountant in your state to figure out which taxes you have to pay as a home owner and what the exact rates are.


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