General country information

Although the USA is well over twice the size of Europe, much interest from UK property investors is centred on Florida, home of the Everglades, Orlando, Key West, Miami and Disney World.

This state has a tropical climate and an extensive coastline that passes from the Atlantic via the Florida Straights into the Gulf of Mexico. Florida is a popular holiday and retirement destination with good letting potential, but is also prone to hurricanes such as the infamous Hurricane Katrina which struck the Gulf Coast area in 2005.

The US as a whole has a mostly temperate climate (excepting Hawaii and Alaska) and offers a comprehensive range of conditions and scenery including the Grand Canyon, Death Valley, and the Rocky Mountains. There are also various natural hazards to consider including volcanoes and earthquakes around the Pacific basin, tornadoes in the mid west, and forest fires in the west.

The US has the largest and most technologically advanced economy in the world. It stood up well to soaring oil prices in the years 2005 to 2007 (imported oil accounts for about two thirds of US consumption), but 2008 saw a financial crisis stemming initially from problems in the sub-prime mortgage market, a stalling house market, rising mortgage loan foreclosures, and, subsequently, a banking crisis. The ‘credit crunch’ and financial crisis has been met with unprecedented levels of Government intervention to support banks, mortgage companies and other major companies.

By the end of 2008 the National Association of Realtors was still reporting falling house sales and falling prices in many states.

NAR chief economist Lawrence Yun said quickly deteriorating conditions in the job market, stock market, and falling consumer confidence had knocked home sales down to another level. ‘We hope the home sales impact from the stock market crash turns out to be short lived, as was the case in 1987 and 2001’, he said. 

According to the accounting firm Deloittes, there are no federal restrictions on ownership of US real estate by overseas nationals. However, the US Department of Commerce and the US Department of Agriculture require real estate ownership by ‘non-resident aliens’ or foreign companies be reported, subject to certain threshold requirements.

Also, ‘many states place restrictions on the ownership of real property by foreign nationals. For instance, some restrict, or even prohibit - ownership of land, others deny the right of an alien to inherit real property, and still others permit land ownership by aliens only if the alien’s country of origin grants similar privileges to US citizens’.

The firm warns those wanting to purchase property in the US to obtain legal advice on whether restrictions apply in their circumstances.

Buyers should also check whether the state in which they are purchasing has imposed disclosure requirements on foreign property owners.

Whether or not property is purchased in the name of the investor or through a company can be important in terms of taxation.

'A foreign investor may purchase real property within the United States in a variety of ways: in his or her own name; through a US corporation, partnership, or trust; or through a foreign legal entity. The income and estate tax consequences of owning or selling property will vary depending on the vehicle through which the actual investment is made’.

The firm warns that ‘a foreign investor who owns the real property directly or through a US corporation or partnership will also likely be subject to US estate and gift taxes, although the insertion of a foreign corporation into the ownership structure may eliminate this exposure’.

Property conveyancing laws vary from state to state but most have disclosure laws that make it illegal for sellers to lie or try to cover up defects in their properties.

In Florida a Contract for purchase and sale or Purchase and sale agreement provided by a real estate agent becomes binding when signed. Although usually pre-printed it is not an official document and can be varied by agreement.
When buying, the full cost of the property purchase will be set out in a payment schedule agreed as part of the contract. Some states require escrow accounts to be set up during the buying process to be held in readiness for completion of a deal. Legal fees and other costs are likely to be around 2 per cent of the price of the property. If a mortgage is needed there will be further costs of about 4.5 per cent of the purchase price.

Last updated: January 2009

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