The National Association of Realtors (NAR) recently conducted a survey over 4,000 real estate sales involving foreign buyers. They found foreign buyers view investing in US real estate as a profitable and secure investment. Currently the large number of properties for sale in Southwest Florida at greatly reduced prices has created good investment opportunities for foreign buyers. R. L. Bailey Realty, Inc. in Naples has considerable experience working with foreign buyers. Below are a few testimonials from our customers. A few issues foreign buyers need to understand.
Many Europeans and other foreign buyers have misconceptions regarding the role of a real estate broker in the US since it is very different from Europe and many other countries
Unlike Europe you work with only one Realtor. Your Realtor's job is to provide you with full information and guidance regarding all properties for sale. In the US Brokers have access to all information on properties for sale including the sales history of the property and other relevant information.. Realtors don't just sell properties they have listed themselves they sell all properties. Many brokers don't list properties at all. These Realtors are called Buyers Brokers and they work with the buyer to find the best property. Unlike Europe working with more than one agent is not a good approach it causes confusion and often complicates the process of finding the best property. The MLS allows Realtors to have access to listing information on all properties for sale.
Real estate brokers in the US have access to all properties for sale including sales history, taxes and current ownership information through the Multiple Listing Services (MLS). The MLS system is accessed by professional real estate brokers and their agents. Brokers normally enter all of their property listings in the MLS system to share them with other brokers and the public. Any Realtor can provide you with full information regarding all properties for sale as well as past sales information. Realtors don't sell only properties listed by themselves but any home, condo, townhouse, vacant lot or business that can be accessed through the MLS system. The R.L. Bailey Website provides you with property listings from the MLS system. All brokers share the same database. There is no need to work with multiple agents. If you see a sign on a property or find it advertised in a newspaper or magazine any Realtor should be able to provide you with information regarding that property.
The difference between individual Realtors and brokers is a matter of depth of area and property knowledge, professional style and experience not access to property information.
Brokers are paid by splitting the commission paid by the seller between the listing and selling broker. The commission is determined by contract before the property is entered into the MLS system.
As a Foreign buyer it is important you understand the home buying process in Florida, and other issues related to US home ownership as well as the tax implications of owning a second home in Florida.
Foreign buyers, same as US citizens, will be subject to various state and county taxes at the time of purchase, annual taxes based on the value of the property, and on any value gains when the property is sold.
Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), requires that an amount equal to 10% of the selling price be withheld from a foreign seller of real estate. This amount is withheld to cover the potential taxes on the gain, but the 10% withheld can be much higher than the actual amount of tax due. The foreign seller will then need to file for a tax refund to collect the excess amount of taxes withheld. A foreign buyer should talk with a tax attorney or an accountant prior to selling a property. Foreign buyers are also eligible to defer the tax on gains when they sell, by doing a '1031 exchange'. A 1031 exchange may be available when you sell an investment property held for over one year, and then purchase another within a specific time frame. It permits the profit from the property sold to be deferred from taxes, until a future date that the new property is eventually sold. Very specific rules need to be followed, but several companies are available to help coordinate the 1031 exchanges for a fee.
If you rent your Florida property as a vacation rental you will need to file a federal U.S. income tax return. You will have to declare your rental income, but you should be able to deduct expenses such as maintenance, utilities or mortgage interest. Since Florida doesn't have a state income tax, income from the property will only be taxed by the federal government.
Property insurance is expensive in a coastal area such as Southwest Florida. Insurance cost can be reduced by purchasing a newer property built meeting recent building codes mandating that structures be able to withstand higher winds. Insurance companies charge less to insure properties that meet the latest code requirements. Homes and condos that are not located directly on or adjacent to the waterfront or in designated "flood zones," also cost less to insure.