What's so foreign about foreign?
America's the land of milk and honey and don't we know it? So do real estate byers from around the world to the tune of 209,000 properties sold to foreign buyers between April 2014 and March 2015, according to the National Association of Realtors. But how complicated do transactions with either foreign buyers or sellers get? They're a challenge, but very doable.
Since we live in paradise, so does every second home or investment buyer want to, including foreign nationals. These transactions can be more complex in both financing and in cultural differences. The biggest issue is planning for money transfers and/or processing of foreign borrower mortgages. Wire transfers and digital signatures have made this process a lot easier, however, sales agreements still need to allow for complications, especially when the buyer is probably back home in a different time zone.
Also, negotiating a sale price can be a totally new experience. Some cultures will negotiate every little detail until you're about to cry; others with real estate practices that typically don't negotiate will just accept the asking price. No matter who your buyer is, the best advice is to get good legal and real estate professionals involved who are familiar with foreign transactions.
If selling to a foreign national is complicated, buying from one is even more complex, since it involves the IRS. If you're buying property from a foreign owner, here are some things you need to know:
The Foreign Investment in Real Property Tax Act of 1980, also known as FIRPTA will apply in almost all real estate transactions with foreign owners. FIRPTA is a tax law that imposes United States income tax on foreign persons, selling U.S. real estate. Under FIRPTA, if you buy U.S. real estate from a foreign person 15 percent of the purchase price must be withheld. These funds together with a completed Form 8288 must be sent to the Internal Revenue Service within 20 days of the transaction. There are some exceptions to this law based on sale price, but it's a sure bet that most properties changing hands on Anna Maria will be subject to the tax.
The onus of paying the tax falls on the buyer of the property. Therefore, employing an attorney familiar with this could be the difference between a smooth transaction and a nightmare. Remember if the tax isn't paid to the IRS in a timely manner, it will become the buyer's responsibility to pay. There is no escaping the IRS it always gets its man.
Finally, Chinese buyers for the fourth straight year outspent all other foreign buyers of United Sates' real estate. They spent three times the amount spent by the next biggest group of foreign buyers, Canadians, per the National Association of Realtors. They also buy more expensive homes with a median price of $542,084 compared to the United States median price of $223,058.
But it's unlikely you'll see too many Chinese buyers on Anna Maria since, per Sotheby's, the only area in Florida that makes its top 10 list is Naples, ranking number seven. Southampton, N. Y., is number one, and Woodstock, Vt., is number 10.
So, if a foreign national is looking to purchase your property, remember he/she probably has a small window of time to spend house hunting, so make your home available. The good news here is he/she probably will make a quick decision. And in general, buyers shouldn't be too worried about dealing with foreign sellers, maybe just a little good advice and a lot of patience. Chinese buyers may not be interested in Anna Maria, but don't worry there are plenty of others who are.