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A Legal Guide to Buying a Home in US

  In the process of buying a house in the United States, you have to do a lot of things: decide the neighborhood where the property is located, see the house, sign the Purchase and Sale Agreement, inspect the house, and apply for a loan (most Chinese people come to the United States to buy property with cash once they are in place. You can avoid this procedure), buy home insurance, and close. As a home buyer, you must understand the relevant knowledge, and you must carefully inspect and check every process of purchasing a property, so as to minimize the possibility of troubles in buying a house.

What is the difference between a co-op, a condo, a townhouse, and a single-family home?


  Due to the similarity in appearance and interior structure, it is easy for foreigners to confuse co-ops in the US with condos, which are very different from a property ownership perspective, which requires special attention.

  Lease, buy is the right of residence, and the property rights of the co-op belong to the company that owns the residential building. With title leases, buyers can use an apartment in a co-op complex, but pay a hefty monthly maintenance fee. The more upscale the co-op, the higher the maintenance fee of course. The maintenance fee is paid to the company that owns the title of the building and covers all maintenance, management costs of the building, and also includes property taxes and mortgage interest (if the company mortgages the building).

  The management rules of co-ops are relatively strict. Most co-ops stipulate that customers who buy the leasehold must live in their own homes and are strictly prohibited from renting out. A common feature of co-ops is that when the client “sells” the apartment, it pays the company that owns the title of the building a lease transfer fee of about 3% of the sale price.

  Many companies that own co-op titles have rules against "selling" (essentially leasing) co-ops to foreigners. This is because in the event of a financial dispute, it will be difficult for the company to appeal to the court for those whose assets and income originate abroad. Even if the case is won, if the other party's assets are abroad, the judgment will be difficult to enforce. From the perspective of foreigners, co-ops are also not a good choice. For example, there are no property rights and no rental conditions, which are very inappropriate for non-US residents.

  The buyer owns the title to the purchased condo unit. Typically, condos have no restrictions on renting out. Owners of condominiums are required to pay property taxes and pay property management fees to the Condominium Board, which manages the operation of the condo. The sale of a condo requires approval from the condo board, but there are no special restrictions. Buyers can purchase condos through traditional financing methods. In most cases, U.S. residents need to put down 20% of the house price, while foreign citizens need more down payment to get a bank loan.

  The owner of the condominium only has the property rights, not the land property rights. When buying a townhouse, the buyer buys the property together with the land. This is the difference between a townhouse and a condominium. In other respects, the responsibilities and rights of the two are similar, and the owner of the townhouse also pays the property tax and pays the property management fee to the management committee.

  The purchase and sale of a single-family home is the least restricted, as the buyer owns the title to the house and land and is solely responsible for paying property taxes and maintenance and repair costs.

Are there school districts in US?

  Public primary and secondary schools in the United States do not charge tuition and textbook fees, but students can only be residents from the school district. School funds and teachers' salaries are allocated by the local government, and the local government's budget mainly depends on the property tax. With high housing prices in an area, the local government can collect more property taxes, build schools with better conditions and newer equipment, and provide salaries that attract high-quality teachers. It's better, so there is a "good school district".

  This is only expressed from a single aspect, in fact, the quality of the school district has become a comprehensive indicator. Although we all know the old adage that "like things gather, people are divided into groups", but in the United States, it is more realistic that "people are divided by money". Therefore, no matter how much financial ability you have and what level of house you can buy, the neighbors around you are often in a similar income area. On the one hand, good school districts can attract higher-level residents, and on the other hand, they have to rely on the high tax support brought by high housing prices; while residents who buy middle-to-high-end housing are relatively wealthy, have relatively stable jobs, and have a relatively high level of education, so they can educate their children. The investment is also relatively large, which can provide a better source of students for the school and help the school to improve the quality of teaching. Such mutual promotion, a good school district has become synonymous with a good community. Of course, housing prices in good school districts have risen sharply due to the combined effect of tangible and intangible values, and the same house in good school districts and bad school districts can sell for a huge difference.

What should I pay attention to when signing a contract?

  After selecting the community, looking at the house, and negotiating the price, the two parties will sign a sale and purchase contract, and fix the conditions and price agreed by the buyer and the seller in a contract that is binding on both parties. Generally, the buyer's agent provides the real estate purchase contract, and the seller's agent makes an evaluation on this basis, and revises or adds clauses with potential legal risks. Once the contract is signed, it will have legal effect, and any modification or cancellation will be liable for breach of contract.

  In addition to listing the names of the buyer and seller and the negotiated price of the property, the house purchase contract must also contain a legal description of the house, including the house address, lot number, title deed number, house plan, land area, building area, and whether the property tax has been settled. , real estate mortgage status, etc. The buyer should verify the descriptions of these properties one by one to confirm that they are correct.

  In addition to this, the contract contains some clauses that protect both the seller and the buyer. For example, the deposit clause is used to protect the seller and compensate the seller for the loss caused by the failure of the buyer to perform the contract after the seller signs the contract and the property goes out of the market. Usually the deposit is 2-3% of the negotiated price of the property.

  The Mortgage Contingency Clause is a buyer's protection clause. In addition to cash transactions, most people need to get a loan from a bank to buy a house, and in many cases, they apply for a loan from the bank after signing a house purchase contract. Therefore, there may be a situation where the contract is signed but the bank refuses to lend. The loan accident clause gives the buyer the right to cancel the contract due to the failure of the loan, that is, a date is agreed in the contract. Before that, if the buyer cannot get the bank loan approval letter, the buyer has the right to cancel the contract, and all the deposit will be returned to the buyer, and both parties will not hold each other accountable. . Therefore, the seller usually investigates and understands that the other party has a certain credit and loan ability before seriously negotiating the transaction with it.

  In order to protect themselves, the buyer should also include in the contract the liability clause for inspection and maintenance. Before closing the deal, the buyer should hire a licensed house inspector to conduct a thorough inspection of the house. If there is any major structural or building damage or hidden danger, the buyer can ask the seller to repair or replace the problem. In order to prevent the seller from completing the repairs before the sale of the property, the buyer can stipulate in the contract that if this happens, the repair cost will be deducted from the negotiated price of the house.

  At the same time, there are two main types of home insurance involved in buying a home: Homeowner’s Insurance and Title Insurance. Homeowners insurance covers any damage to the property and its contents, such as fire, burglary, theft, etc. Homeownership insurance protects the buyer from losses due to title disputes. For example, when an old man dies and his daughter sells the old man's house to you, all legal procedures appear to be proper and complete. Shortly after the house was sold, an old man's son suddenly appeared and declared that the sale was invalid because he, as one of the heirs, did not agree. If you buy home title insurance, the insurance company will pay you to fight the lawsuit; if you lose the lawsuit, the insurance company will compensate you for the loss of the house.

  In the United States, because the land is privately owned, and the developer buys the land from private hands, the land may have changed hands many times, so buying a new house will also have property rights problems. In addition, the developer of the new home may not pay the construction company in full, and the new home is built and sold, but the buyer is unaware of the potential debt dispute. After the house is sold, the construction company comes to collect the debt, and the developer has gone bankrupt or fled, and then the trouble comes. With home title insurance, the insurance company takes care of the compensation to the construction company. Homeownership insurance is a one-time payment insurance that can protect the security of homeownership for a long time. The calculation of this insurance premium is based on the purchase price of the home.

How to transfer the property when buying a house?

  If the above process is completed step by step, it will enter the escrow process, which is to open a special account with a third-party escrow company (Escrow Company) for transfer, and at the same time start the loan process.

  Usually within three working days after the purchase contract is accepted, the buyer needs to deposit the initial deposit in this account, which generally does not exceed 3% of the purchase price. Then carry out a series of required home inspections, such as: termites, construction, etc. Sometimes the results of these checks can be used as a contingency for the final performance of the contract, and sometimes the seller has a counter-offer, and the buyer needs to make further evaluations on the price to see if it is acceptable. The real estate transfer time is usually negotiated by the buyer and the seller. Generally, it is 30 to 45 days. If no loan is required, the transfer can be done in about a week at the earliest. Before the official transfer, the buyer should add the down payment plus all transfer fees, including title insurance, home fire insurance, escrow company fees, wire transfer fees, loan fees, etc.

  After all the fees are paid, the escrow company will do the title transfer registration (Deed Recording & Closing of Escrow). If there are no other problems, the buyer can get the keys to the new house on the day of the official transfer.

Buying a house is also a public responsibility

  For Chinese who want to buy real estate in the United States, but have no plan or cannot live in the United States for a long time, they must understand that when you buy a real estate in the United States, although it becomes your private property, it also brings you an inescapable public property. Responsibilities, whether you use the property or not, you have to fulfill these responsibilities, otherwise you will be fined and even the property will be confiscated.

  The first is the responsibility to pay the property tax. As long as you own the property, you must pay the property tax to the most grass-roots government where the property is located. The property tax is determined by local governments at the grass-roots level, and varies greatly from region to region. The annual tax amount is mostly within the range of 1% to 3% of the housing market price. In Manhattan, New York City, for example, the property tax rate is 1.2%. In Miami, Florida, the property tax rate is 2.4%.

  If you do not pay the property tax on time, you can refer to the relevant notice on the website of the San Francisco city government for the consequences: "The real estate tax rate in San Francisco in 2012-2013 is 1.1691%, and its tax base is the market value of the house. If you think the house is overvalued , contact the City of San Francisco Home Valuation Office within 15 days of receiving your tax bill.

  Every year on November 1st, government departments will send out tax bills one after another, and all property owners will receive tax bills within two weeks. Real estate tax is paid semi-annually, the first from November 1st to December 10th and the second from February 1st to March 10th. Overdue taxpayers will have to pay an additional 10% of the tax amount as a penalty each time they exceed the deadline. If real estate tax is not paid for 5 consecutive years, the property will be auctioned. "

  If your property is a condo or townhouse, you will have to pay a monthly property management fee. There is no standard for property management fees in various places, and each property management company has its own regulations, and the approximate range is 4,000 to 5,000 US dollars per year. Generally speaking, the higher the grade of the residential area, the higher the property management fee charged. However, if it is an old apartment area, although the grade is not high, the property management fee is extremely high, because the more old the apartment, the more maintenance is required, and the labor cost of housing maintenance in the United States is very high, and the property management fee is required. To spend, forcing property management fees to rise.

  If you're buying a single-family home, you probably won't need to pay a property management fee (even if there is one, it's negligible), but you're responsible for keeping the exterior of the property in compliance with local government regulations. Small towns across the U.S. (where single-family homes are mostly scattered) have rules that residents of the area must follow. For example, it is stipulated that the grass in front of the door should not exceed 5 inches, and the grass will grow wildly after the spring rain. If you are lazy and ignore it, you will receive a ticket every few days.

  Therefore, the owner of the single-family house needs to mow the grass in spring and summer, and sweep the leaves in autumn. If it is in the north, and there is a sidewalk in front of the door, then in winter, he must clear the snow on the path in front of the door. If you don't live long enough, you'll have to hire someone to take care of it.

Tax matters for rent and sale of property

  Many Chinese people buy houses in the United States for the purpose of investment rather than living, which may involve the issue of real estate rental. The income tax on the foreigner's real estate in the United States is 20% of the profit if it is rented out. For example, after deducting property taxes, management fees, maintenance fees, etc., the net profit of renting a house is US$50,000 a year, and if calculated at 20%, a tax of US$10,000 will be paid.

  If a foreigner sells the property, 33% of the profit is subject to income tax. For example, a house bought for 300,000 yuan is sold for 500,000 yuan, and the profit is 200,000 yuan. 33% of the 200,000 yuan, 66,000 US dollars, is the income tax to be paid.

  The US federal law has no legal restrictions on foreigners buying real estate. As long as they have money, they will not refuse, but there are special laws for foreigners to sell real estate. In 1980, Congress enacted the “Real Estate for Foreigners” based on concerns that foreigners would buy and sell in the U.S. real estate market and leave without paying taxes after earning the difference. The Foreign Investment in Real Property Tax Act (FIRPTA). The law states: "Foreign individuals or corporations that sell real estate in the United States are required to pay 10% of the house price as their income tax withholding."

  Therefore, a sale of real estate in the United States, whether profitable or not, will be withheld 10% of the transaction price. The money is intercepted by the buyer and turned over to the IRS within 20 days of closing. If the buyer fails to withhold this tax legally and the home is sold in full, it will face a fine of $10,000. If the foreign seller later files the actual tax return (in most cases because the seller finds that the withholding is more than the tax due), the IRS deducts the tax and refunds the remainder; if the seller fails to file the tax return (in most cases because the seller discovered that the withholding was not enough to pay the tax), and the IRS forfeited the withholding.

  In addition, the U.S. estate law is very strict on foreigners. If the foreign owner of the U.S. property dies, the U.S. government will levy a 45% estate tax on the portion of the property over $60,000. In this regard, U.S. citizens have an estate tax exemption of up to $5 million, couples can enjoy up to $10 million, while foreigners can only enjoy an estate tax exemption of $60,000.